The banking system was characterised once again by excess short-term liquidity. Last week's surplus was mainly due to the maturity of Lm64.4 million term deposits, the injection of Maltese lira against the purchase of foreign currency by the Central Bank amounting to Lm5.4 million and net maturing Malta treasury bills totalling Lm5.4 million.

Consequently, on Friday, the Central Bank conducted a term deposit auction. During this auction the Central Bank absorbed Lm57.8 million, Lm6.6 million less than the amount which matured during the same day. As a result, outstanding term deposits decreased from Lm116.4 million to Lm109.8 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 effected, reflecting the excess liquidity position of all the credit institutions.

In the primary market for treasury bills, the government invited tenders for 91-day treasury bills to mature on January 10, 2003. Applications amounted to approximately Lm39.5 million, while the Treasury issued only Lm13 million bills.

Since Lm16 million worth of treasury bills matured on the same day, outstanding bills decreased by Lm3 million to Lm188.4 million.

The weighted average rate resulting from this auction was 3.9656 per cent, up marginally (0.0017 of one percentage point) from the previous auction in the 91-day tenor. The latest rate corresponds to a price of Lm99.021 per Lm100 nominal.

Today, the Treasury will invite tenders for 91-day treasury bills to mature on January 17. Next Tuesday, the Treasury will receive applications for 91-day bills to mature on January 24.

During the week under review, turnover in the secondary market amounted to Lm1,154,000, higher that Lm989,000 of last week. The Central Bank effected net purchases of Lm92,000 in its role as a market maker, while deals outside the Central Bank totalled Lm1,050,000.

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