Money market 24-28 June

- higher 91-day Treasury bill rate registered

Malta Government Treasury Bills

In last week’s primary market for Treasury bills, the Government invited tenders for 91-day Treasury bills, which will mature on 27 September 2002. The amount applied for was Lm9.7 million, whereas the Treasury issued Lm7 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 4.0069 per cent, up by 0.0119 of one percentage point from the previous 91-day rate. This rate corresponds to a price of Lm99.0109 per Lm100 nominal.

On Tuesday the Treasury invited tenders for 182-day Treasury bills to mature on 3 January 2003 at a rate not exceeding a yield of 4.1300 per cent, equivalent to a price of 97.9822 per Lm100 nominal. For the following week, the Treasury will receive applications for 91-day Treasury bills maturing on 11 October 2002. Furthermore, the Treasury announced an increase in the minimum bids for treasury bills from Lm1,000 to Lm20,000 for all tenors except the 28-day treasury bill where the minimum bid remained unchanged at Lm100,000.

Turnover in the secondary market amounted to Lm1.8 million during the week under review as compared to Lm98,000 transacted the previous week. The Central Bank effected net purchases of Lm1.6 million in its role of market maker, and there were no deals effected outside the Bank.

Central Bank monetary operations

During the week under review, the banking system continued to experience excess short-term liquidity. This was mainly due to maturing term deposits amounting to Lm49.5 million and the payment of Lm12.3 million by the Government through direct credits. 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 unfavourable cheque clearing of Lm1.7 million and the withdrawal of currency by banks amounting to Lm3.9 million.

As a result on Friday, 28 June, the Central Bank conducted a term deposit auction, where the Bank invited tenders within the rate band of 3.95 per cent - 4.00 per cent in order to absorb the short-term excess liquidity. During the auction Lm43.5 million were absorbed, Lm 6 million less than the amount maturing on that day. As a result outstanding term deposits decreased to Lm68.5 million from Lm74.5 million of the previous week. The weighted average rate resulting from this auction remained at 3.95 per cent, being the floor of the interest rate band at which the Central Bank conducts its term deposit auction.

Inter-bank market

During the week under review no deals were reported in the inter-bank market reflecting the excess short-term liquidity across the banking sector.