Money Market 8-12 July

- another term deposit auction held

Malta Government Treasury Bills

In the primary market for Treasury bills, the Government invited tenders for 91-day Treasury bills, which will mature on 11 October 2002. The Treasury issued Lm16 million Treasury bills, being the same amount as applied for. The bills issued, exactly matched the amount of maturing Treasury bills on that day, with the outstanding balance remaining unchanged at Lm198.9 million.

The weighted average rate resulting from this auction was 3.9889 per cent, down by 0.0061 of one percentage point from the previous 91-day tenor. This rate corresponds to a price of Lm99.0153 per Lm100 nominal.

On Tuesday the Treasury invited tenders for 28-day Treasury bills to mature on 16 August 2002 at a rate not exceeding 3.75 per cent. For the following week, the Treasury will receive applications for 91-day Treasury bills to mature on 25 October 2002.

During the week under review turnover in the secondary market amounted to Lm211,000, Lm4.3 million less than the previous week. The Central Bank effected net purchases of Lm191,000 in its role of market maker. There were no deals transacted 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 Lm43.5 million, favourable clearing amounting to Lm1.5 million, pension payments by direct credits of Lm1.3 million and the cumulative excess in the Reserve Deposit accounts which the banks 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 purchases of Malta Government Stocks in the secondary market totalling Lm3.2 million and the absorption of Lm19 million by the Central Bank against sales of foreign currency from the banks.

A 14-day term deposit auction was conducted by the Central Bank on Friday, 12 July, 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, Lm53 million were absorbed, Lm9.5 million more than the amount maturing on that day. As a result outstanding term deposits increased to Lm84 million from Lm74.5 million of the previous week. The average term deposit outstanding from January till the previous week was Lm73.08 million. 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 short-term excess liquidity across the banking sector.