Excess short-term liquidity continued to decrease in the week under review, albeit by a lower amount than the week before.
Credit institutions started the week with a cumulative shortfall in their reserve deposit accounts which they are legally bound to hold with the Central Bank. This was partially offset by the injection of Maltese lira against the purchase of foreign currency by the Central Bank totalling Lm 2.1 million.
Accordingly, 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, Lm76.5 million were absorbed, Lm9.5 million less than the amount maturing on the same day.
As a result, outstanding term deposits decreased to Lm112.5 million from Lm122 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 week no interbank deals were transacted in the domestic market, reflecting the excess short-term liquidity prevailing in the whole banking sector.
In the primary market for treasury bills, the government invited tenders for 91-day treasury bills to mature on May 16. The amount of applications approximately totalled Lm43 million.
Since the Treasury issued Lm7.5 million while the amount of bills maturing was Lm5 million, total outstanding treasury bills increased to Lm240.3 million.
The weighted average rate resulting from this auction was 3.6717 per cent, reflecting a bid price of Lm99.0929 per Lm100 nominal. This yield is lower than the previous 91-day rate of 3.6803 per cent.
Today, the Treasury invites tenders for 91-day treasury bills to mature on May 23. Next week, the Treasury will again invite tenders for 91-day treasury bills to mature on May 30.
During the week under review, turnover in the secondary market amounted to Lm3,826,000, with net purchases effected by the Central Bank in its role as market maker totalling Lm618,000. Deals outside the Bank totalled Lm3.1 million.