Money Market Report for week ending 1 June 2001

Monetary Policy Council leaves Central Intervention Rate Unchanged

Central Bank Monetary Operations
The Monetary Policy Council of the Central Bank of Malta held its monthly meeting on Tuesday 29 May and decided to leave the Discount Rate and the Central Intervention Rate, both at 4.75%, unchanged. Thus, the Bank's absorption rate band of 4.70% – 4.75% and the injection rate band of 4.75% – 4.80% were also left unchanged.
On Friday 1 June, the Central Bank conducted a 14-day Repo (injection) auction to mature on Friday 15 June. Through such Repurchase Agreements (in short Repo) the Central Bank provides short-term funding in the money market by purchasing from the banking system securities (normally Malta Government Stocks) with an agreement to sell back these securities at a pre-determined price corresponding to the repo rate.
In this week's auction, the Bank received and accepted two bids. The amount injected, at Lm9.5 million, was significantly less than the Lm36 million maturing on the same day, indicating a relative increase in the net cash position of the commercial banking sector.

Inter-bank Market
During the week under review, turnover in the interbank market, at Lm9 million, was much higher than the previous week's level of Lm2 million.
Transactions consisted in 7-day and 14-day deals. In both tenors the weighted average rate edged downwards: for 7-day money from 4.79% to 4.77%, whilst for 14-day money from 4.80% to 4.78%.

Malta Government Treasury Bills
In the primary market for Treasury Bills, Government invited tenders for 182-day Treasury Bills. An amount of Lm10.02 million was issued.
Considering that there were no Treasury Bills maturing on the same day, the amount of outstanding bills increased by the amount issued and closed the week at Lm164.5 million.
The weighted average yield for the 182-day tenor resulting from this auction went up to 5.0533% from the previous level of 4.9638%. This latest yield corresponds to a weighted average bid price of Lm97.5422 per Lm100 nominal.
On Tuesday 5 June, the Treasury received applications for the tender of 91-day Treasury Bills maturing on 7 September. These bills will be issued on Friday 8 June, coinciding with a maturing amount of Lm16.3 million. For the following week, on Tuesday 12 June, the Treasury will receive applications for 91-day bills to be issued on Friday 15 June to mature on 14 September.
Turnover in the secondary market for Treasury Bills reached a total of Lm 7.59 million, less than the previous week's level of 11.01 million. The bulk of trading was conducted outside the Central Bank, which as market
maker effected net purchases of only Lm66,000.