Money Market Report 5-9 November

first Treasury Bill auction at a fixed rate

Central Bank Monetary Operations
During the week under review, the Central Bank of Malta invited credit institutions to tender for a 14-day repo auction at a rate between the band of 4.50 per cent - 4.55 per cent as set by the Monetary Policy Council of the Central Bank. Three bids were submitted amounting to Lm20.6 million at the weighted average rate of 4.5225 per cent, slightly higher than the previous rate of 4.5218 per cent.
On the same day, there was a maturing repo amounting to Lm11.0 million. Thus, in effect, the Central Bank injected a net of Lm8.4 million. This net injection was mainly due to banks’ participation in the secondary market for Treasury bills and was also influenced by the current issue of MGS as the public withdrew funds in order to purchase government bonds.

Inter-bank market
The volume of inter-bank deals was significantly less than the previous week, totalling Lm1 million compared to Lm7 million the week before. The deal was conducted in 7-days at the rate of 4.50 per cent. Both rate and tenor remained unchanged.

Malta Government Treasury Bills
In the Primary market for Treasury bills the Government issued the equivalent of Lm6.08 million in 91-day Treasury bills, well below the volume of applications received which amounted to Lm12.2 million. In contrast, no bids were forthcoming in the auction of the 28-days Treasury bills indicating that during the week reviewed, market participants showed a marked preference for the longer maturity.
On the same day, maturing Treasury bills amounted to Lm6.5 million, so that the amount of outstanding Treasury bills decreased marginally to Lm194.5 million.
An innovative feature was that the auction for the 91-day Treasury bills was conducted at a fixed rate of 4.8803 per cent rather than through the usual practice of auctioning the rate. The fixed rate was slightly less than the 4.9000 per cent of the previous week. The current yield of the latest issue corresponds to a weighted average bid price of Lm98.7979 per Lm100 nominal.
On Tuesday 13 November, the Treasury received applications for the tender of 28-day and 91-day Treasury bills maturing on 14 December 2001 and 15 February 2002 respectively. These bills will be issued on Friday 16 November, coinciding with a same day maturity of Lm2.0 million. For the following week, on Tuesday 20 November, the Treasury will receive applications for 91-day bills to be issued on Friday 23 November to mature on 22 February 2002.
Turnover in the secondary market for Treasury bills increased to Lm9.2 million, significantly higher than the previous week’s level. The bulk of the activity was conducted outside the Central Bank.