In the week under review, excess liquidity in the banking system has once again increased to a new record high. This was largely due to the Lm111.5 million maturing term deposits, the injection of Maltese lira against the purchase of foreign currency amounting to Lm4.7 million and direct credits in relation to pensions of Lm2.9 million.
Furthermore the banks started the week with a cumulative excess in the reserve deposit accounts which they are legally bound to hold with the Central Bank. This liquidity was partially offset by a withdrawal of Lm2.5 million notes and coins by banks from the Central Bank.
Accordingly, on Thursday, the Central Bank of Malta invited tenders for a 15-day term deposit auction to absorb this liquidity (the auction was conducted a day earlier, since Friday was a public holiday). During this auction, Lm133.8 million were absorbed, Lm22.3 million more than the amount which matured during the same day.
As a result, outstanding term deposits increased from Lm157 million to a new record high of Lm179.3 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.
No interbank deals were effected during this week. This reflects the surplus liquidity position of the banking system.
In the primary market for treasury bills, the Government invited tenders for 92 and 183-day Treasury bills to mature on March 14, 2003, and June 13, 2003, respectively.
Demand for treasury bills continued to intensify. In fact applications in the two tenors totalled Lm121.06 million while the Treasury issued Lm20 million worth of bills - Lm10 million in each tenor. Since Lm11.3 million treasury bills matured on the same day, the level of outstanding treasury bills increased to Lm222.7 million.
The weighted average rate of the 92-day treasury bills was 3.7348 per cent, reflecting a bid price of Lm99.0674. This rate was 11.8 basis points lower than the previous 91-day rate. For the 183-day treasury bills the average rate was 3.7998 per cent, corresponding to a price of Lm98.1305.
Bills of a similar tenor were last issued on October 4 at a weighted average rate of four per cent.
Today the Treasury will invite tenders for 91-day treasury bills to mature on March 21, 2003. Next Monday, the Treasury will receive applications for 91-day bills to mature on March 28, 2003.
During the week under review, turnover in the secondary market amounted to Lm850,000 out of which Lm275,000 was effected outside the Central Bank.