Money Market 15-19 July

- higher outstanding term deposits

Malta Government Treasury Bills

In the primary market for Treasury bills, the Government invited tenders for 28-day Treasury bills maturing on 16 August 2002. The Treasury issued Lm12 million Treasury bills, being the same amount as applied for. The bills issued, exactly matched the amount of maturing Treasury bills on that day. Accordingly the outstanding balance remained unchanged at Lm198.9 million.

The weighted average rate resulting from this auction was 3.9999 per cent. This rate corresponds to a price of Lm99.6941 per Lm100 nominal which is almost equivalent to the 14-day Central Intervention Rate of 4.00 per cent.

On Tuesday the Treasury invited tenders for 91-day Treasury bills to mature on 25 October 2002. For the following week, the Treasury will receive applications for 91-day Treasury bills to mature on 1 November 2002.

During the week under review turnover in the secondary market amounted to Lm420,000, Lm209,000 less than the previous week. The Central Bank effected net purchases of Lm394,000 in its role of market maker. There were no deals transacted outside the Bank.

Central Bank monetary operations

The week under review was once again characterised with excess short-term liquidity. This was mainly due to maturing term deposits amounting to Lm31 million, an injection of Lm15.3 million by the Central Bank against purchases of foreign currency from the banks, direct credits of Lm1.2 million, dividend payments amounting to Lm1.8 million, Lm1.6 million notes and coins deposited by banks with the Central Bank together with 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 unfavourable cheque clearing of Lm1.9 million.

Consequently a 14-day term deposit auction was conducted by the Central Bank on Friday, 19 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, Lm40 million were absorbed, Lm9 million more than the amount maturing on that day. As a result outstanding term deposits increased to Lm93 million from Lm84 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 auctions.

Inter-bank market

In the week under review activity in the interbank market consisted of two deals totalling Lm4 million. The two transactions were in the seven-day and 14-day tenors, both at a rate of 3.98 per cent. The seven-day rate was slightly lower by 0.0067 of one percentage point than the previous one-week rate while the 14-day rate was also lower by 0.0038 of one percentage point than the previous two-week rate.