Lower 91- day primary treasury bill rate

In the week under review, the banking system was once again characterised by excess short-term liquidity. This excess liquidity was mainly due to maturing term deposits amounting to Lm22.5 million, as well as the injection of Maltese lira against purchases of foreign currency by the Central Bank amounting to Lm3.1 million.

Moreover, there were net maturing treasury bills totalling Lm2.5 million in the primary market and a cumulative excess in the reserve deposit accounts which banks are legally bound to hold with the Central Bank which continued to accentuate this excess liquidity.

Accordingly, on Friday, the Central Bank of Malta invited tenders for a 14-day term deposit auction to absorb the excess short-term liquidity in the market. During this auction Lm29 million were absorbed, or Lm6.5 million more than the amount which matured during the previous week, indicating an increase in excess short term liquidity.

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.

As a result, outstanding term deposits increased by Lm6.5 million from Lm47 million to Lm53.5 million.

During the week under review, no inter-bank deals were transacted in the local money market. 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 November 8. Applications amounted to Lm10.1 million.

The Treasury issued only Lm0.5 million treasury bills, while Lm3 million worth of bills matured on the same day. Thus the outstanding balance, which stood at Lm198.8 million since May 2002, decreased to Lm196.3 million.

The weighted average rate resulting from this auction was 3.9975 per cent, down marginally from last week's 91-day rate of 4.0081 per cent. This rate corresponds to a price of Lm99.0132 per Lm100 nominal.

Today, the Treasury will invite tenders for 91-day treasury bills to mature on November 15.

Next week, the Treasury will receive applications for 91-day treasury bills maturing on November 22.

During the week under review, turnover in the secondary market increased to Lm204,000, with net purchases totalling Lm196,000. As in the previous week, there were no deals transacted outside the Central Bank of Malta.