In the week under review, short-term liquidity in the money market decreased from the record high level of the previous week. The reduction in this week's liquidity was mainly due to foreign currency outflows totalling Lm12.1 million, currency withdrawals from the Central Bank of Lm6.5 million and unfavourable cheque clearing of around Lm3.4 million.

Moreover, banks had a cumulative shortfall in the reserve deposit account which they are legally bound to hold with the Central Bank. This was partly offset by a reduction in banks' treasury bill holdings of Lm8.18 million.

Consequently, the Central Bank conducted a term deposit auction on Friday. Following this auction the Bank absorbed Lm57 million, while Lm133.8 million matured.

Accordingly, outstanding term deposits fell from an all-time high of Lm180.8 million to Lm104 million. The latest auction was carried out at the weighted average rate of 3.7 per cent, being the floor of the interest rate band of 3.7-3.8 per cent at which the Central Bank conducts its weekly auctions for 14-day money.

During the week reviewed, an interbank deal was transacted in the 14-day tenor at a rate of 3.8 per cent, which is 10 basis points above the weighted average rate of the term deposit auction.

In the primary market, the government invited tenders for 91 day treasury bills to mature on March 28, 2003. Demand for treasury bills was once again much larger than the amount issued.

In fact, applications for treasury bills totalled Lm39.8 million, while the treasury issued Lm18.5 million worth of bills. Since Lm13 million matured on the same day, the level of outstanding treasury bills increased to Lm224.763 million. This was reduced to Lm218.831 million following a buyback of Lm5.932 million by the Treasury.

The weighted average rate resulting from this auction was 3.6737 per cent, which is only marginally lower than the previous 91-day rate of 3.6774 per cent. This week's rate corresponds to a bid price of Lm99.0924.

Yesterday, the Treasury invited tenders for 91-day treasury bills to mature on April 4, 2003. Next week the Treasury will receive applications for 91 treasury bills to mature on April 11, 2003.

In the secondary market, total turnover amounted to Lm680,000. These were all purchases conducted by the Central Bank in its role as a market maker.

No deals were conducted outside the Central Bank.