During the week under review, the banking system continued to experience excess short-term liquidity. This was mainly due to maturing term deposits amounting to Lm51.5 million and the injection of Lm8.6 million by the Central Bank against purchases of foreign currency from the banks. However, the excess short-term liquidity decreased during the above-mentioned week due to net purchases of treasury bills amounting to Lm8.8 million in the primary and secondary markets.

A 15-day term deposit auction was conducted on Thursday, due to the fact that Friday, June 7 was a public holiday. The Central Bank of Malta invited tenders for this auction within the rate band of 3.95-4.00 per cent in order to absorb the short-term excess liquidity. During the auction Lm38 million were absorbed. As a result, outstanding term deposits decreased to Lm79 million from Lm92.5 million of the previous week. The weighted average rate resulting from this auction was 3.95 per cent, being the floor of the interest rate band at which the Central Bank conducts its term deposit auction.

Activity in the inter-bank market amounted to Lm4.8 million, unlike the previous week when no inter-bank activity was recorded. Three deals were transacted in the one week tenor at a weighted average rate of 3.9867 per cent, which was 0.0026 per cent lower than the previous one-week rate.

In the primary market for treasury bills, the government invited tenders for 92-day treasury bills to mature on September 6. The amount applied for was Lm19.6 million, however the Treasury issued Lm12 million, exactly the same amount of maturing treasury bills. Thus, outstanding treasury bills remained unchanged at Lm198.9 million.

The weighted average rate resulting from this auction was 3.9969 per cent, 0.0112 per cent lower than the previous 91-day rate. This rate corresponds to a price of Lm99.0026 per Lm100.

Today the Treasury will invite tenders for 181-day treasury bills to mature on December 12 at a price of not less than Lm97.9740 per Lm100 nominal. For the following week, the Treasury will receive applications for 91-day treasury bills. These bills will mature on December 20, 2002.

Turnover in the secondary market amounted to Lm12 million during the week under review as compared to Lm13.1 million transacted the previous week.

The Central Bank effected net sales of Lm7.1 million and there were no deals effected outside the Bank.