Excess short-term liquidity in the banking sector continued to increase during the week under review.
The main reasons for this surplus were maturing term deposits totalling Lm76.1 million held at the Central Bank, favourable cheque clearing amounting to Lm3.9 million, currency deposits with the Central Bank of Lm1.8 million, direct credits and dividend payments by the government of more than Lm1 million and a reduction in banks' treasury bill holdings of Lm5.4 million.
Accordingly, a 14-day term deposit auction was conducted by the Central Bank of Malta on Friday, where the bank invited tenders within the rate band of 3.7-3.75 per cent in order to absorb the excess short-term liquidity.
During this auction, Lm83 million were absorbed, Lm6.9 million more than the amount which matured on the same day. As a result, outstanding term deposits increased to Lm136.5 million from the Lm129.6 of the previous week.
The weighted average rate resulting from this auction remained at 3.7 per cent, being the floor of the interest rate band at which the Central Bank conducts its term deposit auction.
Unlike the previous week where Lm4.8 million were transacted, no deals were affected in the inter-bank market during the week under review. This reflects the excess short-term liquidity across the banking sector.
In the primary market for treasury bills, the government invited tenders for 91-day treasury bills to mature on April 25. The amount of applications totalled Lm63.6 million, whereas the Treasury issued Lm17 million, exactly the same amount of maturing treasury bills. Thus, outstanding treasury bills remained unchanged at Lm233.8 million.
The weighted average rate resulting from this auction was 3.6843 per cent, reflecting a bid price of Lm99.0898 per Lm100 nominal. This yield is marginally lower than the previous 91-day rate of 3.6918 per cent.
Today, the Treasury invites tenders for 91-day treasury bills to mature on May 2. Next week, the Treasury will again invite tenders for 91-day treasury bills to mature on May 9.
During the week under review, turnover in the secondary market amounted to almost Lm2 million. All deals were effected outside the Central Bank of Malta.