The Governor of the Central Bank of Malta, after deliberating with the Monetary Policy Advisory Council of the Bank, decided last Thursday to leave both the central intervention rate and the discount rate unchanged at 3.75 per cent.
During the week under review, the banking sector experienced a decrease in excess liquidity. This was mainly attributed to the fact that credit institutions started the week with a shortfall in their reserve deposit accounts which they are legally bound to hold with the Central Bank.
Furthermore, there was the sale of Maltese lira by the Central Bank from banks against foreign currency totalling Lm20 million. This was partly mitigated by direct credits totalling Lm13.9 million in respect of salaries, Treasury pensions and dividends.
Consequently, on Friday, a 14-day term deposit auction was conducted by the Central Bank of Malta, whereby the bank invited tenders from credit institutions within its absorption band of 3.7-3.75 per cent.
During the auction, Lm40 million were absorbed, Lm26.3 million less than the amount maturing on the same day. As a result, outstanding term deposits decreased from Lm140.8 million to Lm114.5 million.
The weighted average rate resulting from this auction was 3.7013 per cent, being marginally higher than the floor of the interest rate band at which the Central Bank conducts the term deposit auction.
As in the previous week, no deals were transacted in the interbank market. This reflects the high level of surplus liquidity characterising the whole banking system.
In the primary market for treasury bills, the government last Tuesday invited tenders for 91-day treasury bills to mature on June 27. Total applications for bills amounted to approximately Lm63.3 million, with the Treasury issuing only Lm21 million.
Since the volume of treasury bills issued was higher than the Lm18.5 million that matured, total outstanding treasury bills increased by Lm2.5 million to Lm248.74 million.
The weighted average rate resulting from this auction was 3.4610 per cent, reflecting a bid price of Lm99.1445 per Lm100 nominal. This yield was 2.41 basis points lower than the previous three-month rate of 3.4851per cent.
Tomorrow, the Treasury will invite tenders for 91-day treasury bills to mature on July 4. Next week, the Treasury will invite tenders for 363-day treasury bills to mature on April 8.
During the week under review, turnover in the secondary market amounted to Lm363,000. Of these Lm200,000 were transacted outside the Central Bank.