Central Bank money market 17-21 June
- record low 91-Treasury bill rate

Central Bank Monetary Operations

The week under review was once again characterised by excess short-term liquidity. This was mainly due to maturing term deposits amounting to Lm38 million and the injection of Lm2.2 million by the Central Bank against purchases of foreign currency from the banks. Moreover the banks started the week with a cumulative excess in the Reserve Deposit accounts which they are legally bound to hold with the Central Bank. These factors more than offset the effect of fund outflows from the commercial banking sector resulting from net purchases of Treasury bills amounting to Lm2.09 million in the primary market and unfavourable cheque clearing totalling Lm2.6 million.

Consequently on Friday, 21 June, the Central Bank conducted a term deposit auction where the Bank invited tenders within the rate band of 3.95% - 4.00% in order to absorb the short-term excess liquidity. During the auction Lm25 million were absorbed, Lm13 million less than the amount maturing on the same day. As a result outstanding term deposits decreased to Lm74.5 million from Lm87.5million of the previous week. The weighted average rate resulting from this auction remained at 3.95%, being the floor of the interest rate band at which the Central Bank conducts its term deposit auction.

Inter-bank Market

Activity in the interbank market consisted of only one deal amounting to Lm1 million as opposed to the previous week where no deals were transacted. This transaction was in the one month tenor at a rate of 4%.

Malta Government Treasury Bills

In the primary market for Treasury bills, the Government invited tenders for 91-day Treasury bills which will mature on 20 September 2002. The amount applied for was Lm16.9 million, whereas the Treasury issued Lm15.8 million, exactly the same amount of maturing Treasury bills. Thus, outstanding Treasury bills remained unchanged at Lm198.9 million.

The weighted average rate resulting from this auction was 3.9950%, down by 0.0019 of a percentage point from the previous 91-day rate. This rate corresponds to a price of Lm97.884 per Lm100. Today the Treasury will invite tenders for 91-day Treasury bills to mature on 27 September 2002.

Turnover in the secondary market amounted to only Lm98,000. The Central Bank effected net purchases of Lm70,000 in its role of market-maker. No deals were effected outside the Central Bank.