The banking system continued to be characterised by excess short-term liquidity in the week ended on Friday. This excess liquidity was mainly due to maturing term deposits amounting to Lm24.5 million, as well as the injection of Maltese lira against purchases of foreign currency by the Central Bank amounting to Lm3.3 million and net maturing treasury bills totalling Lm8.9 million in the primary market.
Furthermore, the banks started the new maintenance period (August 15 - September 14) with a cumulative excess in the reserve deposit accounts which they are legally bound to hold with the Central Bank. This continued to accentuate the banks' excess liquidity position.
Consequently, on Friday, the Central Bank of Malta invited tenders for a 14-day term deposit auction to absorb the excess liquidity in the market. During this auction Lm39 million were absorbed, or Lm14.5 million more than the amount which matured during last week. As a result, outstanding term deposits increased from Lm53.5 million to Lm68 million.
The latest auction was carried out at the weighted average rate of 3.95 per cent, being the floor of the interest rate band of 3.95 - 4.05 per cent at which the Central Bank conducts its weekly auctions for 14-day money.
During the week under review, no inter-bank deals were transacted in the local money market. Once again, this reflects the excess short-term liquidity across the banking sector.
Last week the Treasury invited tenders for 91-day Treasury bills, to mature on November 15, 2002. Applications amounted to approximately Lm11 million while the Treasury issued only Lm5 million worth of treasury bills. Since Lm13 million worth of treasury bills matured on the same day, outstanding bills dropped by almost Lm8 million to Lm188.2 million.
The weighted average rate resulting from this auction was 3.9984 per cent, marginally higher from the premises week's 91-day rate of 3.9975 per cent. This rate corresponds to a price of Lm99.0130 per Lm100 nominal.
Today, the Treasury will invite tenders for 91-day treasury bills to mature on November 22. For the following week, the Treasury will receive applications for 91-day treasury bills maturing on November 29.
During the week under review, turnover in the secondary market amounted to only Lm2,000, representing a sharp decrease of Lm202,000 from last week.
As in the previous week, there were no deals transacted outside the Central Bank of Malta.