The banking sector continued to experience excess liquidity last week, albeit at a lower level than the week before. The decrease in liquidity was attributable to the fact that credit institutions started the week with a shortfall in their reserve deposit accounts which they are legally bound to hold with the Central Bank and currency withdrawals totalling Lm5.5 million.
This was partly mitigated by the injection of Lm5 million by the Central Bank against the purchase of foreign currency from credit institutions and net maturing treasury bills amounted to Lm6 million.
Accordingly, a 13-day term deposit auction was conducted by the Central Bank of Malta on Friday, whereby the bank invited tenders from credit institutions within its absorption band of 3.7-3.75 per cent.
During the auction, Lm70 million were absorbed, Lm4.5 million less than the amount maturing on the same day. As a result, outstanding term deposits decreased from Lm114.5 million to Lm110 million.
The weighted average rate resulting from this auction decreased marginally from 3.7013 per cent to 3.7 per cent, the floor of the interest rate band at which the Central Bank conducts its term deposit auction.
No interbank deals were transacted in the domestic market, reflecting the excess liquidity still characterising the whole banking sector.
In the primary market for treasury bills, the government invited tenders for 91-day treasury bills to mature on July 4.
Demand for bills remained well in excess of supply. In fact, total applications for bills amounted to Lm77.4 million, with the Treasury issuing only Lm31 million.
Since the volume of treasury bills issued was lower than the Lm37 million that matured, total outstanding treasury bills decreased by Lm6 million to Lm242.7 million.
The weighted average rate resulting from this auction was 3.4998 per cent, reflecting a bid price of Lm99.1350 per Lm100 nominal. This yield was 3.88 basis points higher than the previous three-month rate of 3.4610 per cent.
This was the first increase in the 91-day treasury bill primary rate since February 7.
Today, the Treasury invites tenders for 363-day treasury bills to mature on April 8, 2004.
Next week, the Treasury will invite tenders for 274-day treasury bills to mature on January 16, 2004.
During the week under review, turnover in the secondary market amounted to Lm78,000. All deals were transacted by the Central Bank in its role as market maker.