During the week under review, short-term liquidity in the banking system continued to increase. This week's surplus was mainly due to the maturity of Lm33 million term deposits, the injection of Maltese lira against the purchase of foreign currency by the Central Bank amounting to Lm14.3 million and net maturing Malta Government Stocks held by the banks totalling Lm9.4 million.
Moreover, there was cumulative excess in the reserve deposit accounts which banks are legally bound to hold with the Central Bank of Malta. This liquidity was partially offset by a withdrawal of Lm2.5 million notes and coins by banks from the Central Bank.
Consequently, the Central Bank conducted a term deposit auction last Friday. During this auction the Central Bank absorbed Lm52 million, Lm19 million more than the amount which matured during the same day. As a result, outstanding term deposits increased from Lm97.4 million to a record high of Lm116.4 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 same week, the inter-bank market was once again inactive, reflecting the excess liquidity position of all the credit institutions.
In the primary market for treasury bills, the government invited tenders for 182-day treasury bills to mature on Friday, April 4, 2003. Applications amounted to approximately Lm43.7 million, while the Treasury issued only Lm14 million treasury bills.
Since Lm15 million worth of treasury bills matured on the same day, outstanding bills decreased by Lm1 million to Lm191.4 million.
The weighted average rate resulting from this auction was four per cent, down by almost 10 basis points (0.0995 of one percentage point) from the previous auction of the 182-day tenor, which had been held on July 5. The latest rate corresponds to a price of Lm98.0445 per Lm100 nominal.
Today the Treasury will invite tenders for 91-day treasury bills to mature on January 10, 2003. For the following week, the Treasury will receive applications for 91-day bills to mature on 17 January 2003.
During the week under review, turnover in the secondary market amounted to Lm989,000. These were all purchases conducted by the Central Bank in its role as a market maker.
No deals were transacted outside the Central Bank of Malta.