Liquidity in the banking system decreased in the week under review and credit institutions started the week with a shortfall in the reserve deposit accounts that they are legally bound to hold with the Central Bank. Furthermore, the purchase of Lm3.5 million worth of foreign currency against the Maltese lira from the Central Bank reduced liquidity further.
Partly offsetting these factors was a Lm2.7 million contraction in currency in circulation and a positive net clearing of cheques amounting to Lm2.5 million.
On Friday, the Central Bank conducted a seven-day term-deposit auction, absorbing a total of Lm84.9 million. But this was Lm3 million less than the Lm87.9 million worth of term deposits that matured on the same day, resulting in a net injection of Lm3 million.
The rate resulting from the auction was 3.20 per cent, being the floor of the interest rate band (3.20-3.25 per cent) at which the Central Bank conducts its term-deposit auctions.
After a fortnight in which no interbank deals were transacted, two deals for a total of Lm0.3 million were conducted in the week under review. Both deals were effected in the overnight tenor, at a weighted average interest rate of 3.1699 per cent, which was one basis point lower than the rate at which the previous interbank deal, that of December 22, was effected.
In the primary market for Treasury bills, the Treasury invited tenders for 90-day bills maturing on April 13. Tenders for Lm7 million were accepted by the Treasury from the Lm30.4 million worth of bids submitted. Given that the same amount of bills matured during the week, the outstanding balance of Treasury bills remained unchanged at Lm176.7 million.
The latest three-month rate resulting from the week's Treasury bill auction was 3.2121 per cent. This was 0.2 basis points higher than the previous 91-day rate for bills issued the previous week. The latest rate reflects a bid price of Lm99.2142 per Lm100 nominal.
Today, the Treasury invites tenders for 91-day bills maturing on April 21. For the following week, the Treasury will accept bids for bills in the same tenor maturing on April 28.
There was practically no activity in the secondary market for Treasury bills except for some retail transactions that were conducted by the Central Bank in its role of market-maker.