During the week under review, the banking system was characterised by excess liquidity, albeit at a higher level than the previous week. This was mainly due to maturing term deposits of Lm60 million, Lm2.5 million in direct credits relating to pensions and a cumulative excess in banks' reserve deposit accounts which they are legally bound to hold with the Central Bank.
This surplus was partially offset by the purchase, by a credit institution, of treasury bills in the secondary, as well as the withdrawal of currency by banks totalling Lm3.6 million.
Consequently, a 14-day term deposit auction was conducted by the Central Bank of Malta on Friday, where the bank invited tenders within the rate band of 3.7-3.75 per cent.
During the auction, Lm63 million were absorbed, Lm3 million more than the amount maturing on the same day. As a result, outstanding term deposits increased to Lm133 million from Lm130 million.
The weighted average rate resulting from this auction remained at 3.7 per cent, being the floor of the interest rate band at which the Central Bank conducts its term deposit auction.
As in the previous weeks, no deals were transacted in the interbank market. This reflects the high level of surplus liquidity characterising the whole banking system.
In the primary market for treasury bills, the government invited tenders for 91-day treasury bills to mature on June 6. Total demand for bills amounted to approximately Lm60.6 million, with the Treasury issuing only Lm20 million.
Since the volume of treasury bills issued was only slightly less than the amount of bills maturing, the total outstanding treasury bills remained at approximately Lm235.3 million.
The weighted average rate resulting from this auction was 3.6337 per cent, reflecting a bid price of Lm99.1022 per Lm100 nominal. The latest 91-day rate was lower than the 3.6525 per cent of the previous week's tender.
Today, the Treasury will invite tenders for 182-day treasury bills to mature on September 12. Next week, the Treasury will invite tenders for 91-day treasury bills to mature on June 20.
During the week under review, turnover in the secondary market amounted to Lm7,575,000, of which Lm7,500,000 were transacted outside the bank. The Central Bank effected net purchases of Lm15,000 in its role as market maker.