Following the monthly meeting with the Monetary Policy Advisory Council last Tuesday, the Central Bank Governor last week decided to leave the Central Bank's central intervention rate unchanged at 3.25 per cent.

Short-term excess liquidity in the banking system increased substantially in the week under review. Credit institutions started the week with a surplus in the reserve deposit accounts which they are legally bound to hold with the Central Bank.

Furthermore, direct credits related mainly to government salaries amounting to Lm14.5 million also contributed to this increase in liquidity. Partly offsetting this increase were the net issue of Treasury bills of Lm5.8 million and a negative net clearing of cheques totalling Lm2.3 million.

Accordingly, the Central Bank conducted a seven-day term-deposit auction in order to absorb this excess liquidity. The total amount absorbed was Lm25.2 million higher than the Lm74.3 million that matured on the same day, leaving an outstanding balance of Lm99.5 million.

The rate resulting from the latest auction was 3.20 per cent, being the floor of the interest rate band (3.20-3.25 per cent) at which the Central Bank conducts its auctions.

Interbank activity in the week under review decreased sharply from the Lm14 million transacted in the previous week to only Lm0.6 million. This reflected the excess liquidity prevailing across the banking sector.

In the primary market, the Treasury invited tenders for 91-day Treasury bills to mature on March 3, 2006. Out of the Lm33.7 million worth of bids submitted, the Treasury accepted Lm13.7 million. Given that Lm7.9 million worth of bills matured during the week under review, the outstanding balance of Treasury bills increased by Lm5.8 million, from Lm173 million to Lm178.8 million.

The latest three-month rate resulting from this auction was 3.1923 per cent. This was 0.3 basis points higher than the previous 91-day rate for bills issued on November 18. The latest rate reflects a bid price of Lm99.2104 per Lm100 nominal.

Today, the Treasury will receive applications for 91-day bills to mature on March 10, 2006. For the following week, the Treasury will accept bids for 182-day tenor bills to mature on June 16, 2006.

Turnover in the secondary market remained low as in the previous week and amounted to only Lm0.1 million. All trading was effected by the Central Bank in its role of market-maker.

MaRIS statistics for November

During the month of November, 4,100 payment messages were processed through MaRIS, for a total value of Lm1,365.8 million. These were divided into 1,746 customer payments for a value of Lm77.3 million and 2,354 interbank payments totalling Lm1,288.5 million. 

The daily volume average for the month under review was 186 messages for a value of Lm62.1 million. The peak day for the highest number of messages processed was November 28 with 244 messages. That for value was registered on November 4 with Lm258.9 million.

Further details on turnover in the local payment systems can be found on the Central Bank of Malta website: www.centralbankmalta.com.