Slight decrease in the level of outstanding term deposits

The level of surplus liquidity in the banking system decreased slightly last week when compared with the previous week. Factors inducing this decrease in liquidity were the purchase of foreign currency against the Maltese lira from the Central Bank by the credit institutions amounting to Lm4.1 million and an increase in currency in circulation of Lm3.3 million.

Government payments of Lm6.8 million and net maturing Treasury bills amounting to Lm3.3 million contributed in limiting the decrease in liquidity.

Accordingly, on Friday, the Bank held its usual 14-day term deposit auction. An aggregate of Lm19 million was absorbed from the banking sector, Lm1.5 million less than the Lm20.5 million worth of term deposits that matured on the same day. Thus, the level of the banks' outstanding term deposits at the Central Bank decreased slightly from Lm29 million to Lm27.5 million.

The rate resulting from the latest auction remained at 2.95 per cent, being the floor of the interest rate band (2.95-3.00 per cent) at which the Bank conducts its term deposit auctions.

Interbank activity decreased from the previous week's level of Lm9.7 million to Lm7.3 million.

Two deals amounting to Lm4.5 million were conducted in the two-week tenor at a rate of 2.97 per cent. Another deal, amounting to Lm1 million, was effected in the overnight tenor at the rate of 2.95 per cent. Both rates remained unchanged from the previous transacted rates.

On the other hand, one deal of Lm1.8 million was transacted in the one-week tenor at a rate of 2.96 per cent one basis point lower than the previous seven-day, deal conducted during the previous week.

In the primary market, the Treasury invited tenders for 91-day Treasury bills to mature on June 3. The amount of bids submitted totalled Lm21.2 million, of which only Lm8 million were accepted by the Treasury. Given that Lm11 million worth of bills matured during the week under review, the outstanding balance of Treasury bills decreased by Lm3 million, from Lm258.1 million to Lm255.1 million.

The latest three-month rate resulting from this auction was 2.9736 per cent. This was 0.04 basis points lower than the previous 91-day rate for bills issued in the previous week. This rate reflects a bid price of Lm99.2641 per Lm100 nominal.

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

Turnover in the secondary Treasury bill market amounted to only Lm0.07 million during the week. All deals were conducted with the Central Bank in its role as market-maker.