During the week under review, the banking sector was once again characterised by excess short-term liquidity. This week's surplus was mainly due to the maturity of Lm23 million term deposits held at the Central Bank, the injection of Maltese lira against the purchase of foreign currency from the banks amounting to Lm7.2 million, dividends payments by the government of more than Lm2.8 million and currency deposits with the Central Bank of Lm2 million.
Moreover, the credit institutions started the new maintenance period January 15 to February 14 this year with a cumulative excess in the Reserve Deposit accounts which they are legally bound to hold with the Central Bank. These were partially offset by an increase of Lm5.8 million in the credit institutions' treasury bill holdings and net payments by the banks of Lm2.9 million in connection with cheque clearing.
Accordingly, an auction was held by the Central Bank on Friday, where the Bank invited tenders for a 14-day term deposit in order to absorb the surplus liquidity in the market. During this auction, Lm53.5 million were absorbed, Lm30.5 million more than the amount that matured on the same day.
Accordingly, outstanding term deposits increased from Lm99.1 million to Lm129.6 million. The latest auction was carried out at the weighted average rate of 3.7 per cent, being the floor of the interest rate band of 3.70-3.75 per cent at which the Central Bank conducts its weekly auctions.
Unlike the previous week when no deals were transacted, inter-bank activity during the week under review amounted to Lm4.3 million. Three deals were transacted in the overnight tenor at a weighted average rate of 3.7084 per cent, which is 19.16 basis points (0.1916 percentage point) lower than the previous overnight rate transacted in November last year.
In the primary market for treasury bills, the government invited tenders for 91-day treasury bills to mature on April 17. Demand for treasury bills continued to intensify with bids reaching a total of Lm51.9 million. The Treasury issued only Lm15 million worth of bills, Lm6 million more than the amount that matured on the same day. Consequently, the level of outstanding treasury bills increased to Lm233.8 million.
The weighted average rate of the new issue is 3.6918 per cent. The new rate reflects a bid price of Lm99.0979 per Lm100 nominal.
Last Tuesday, the Treasury invited tenders for 91-day treasury bills to mature on April 25. Next Tuesday, the Treasury will again invite tenders for 91-day treasury bills to mature on May 2.
During the week under review, turnover in the secondary market amounted to Lm1,302,000, with the bulk of trading effected outside the Central Bank. This was Lm8,862,000 less than the previous week's level.