Investors’ corner

Money Market Report 16-20 September

Official fixing of interbank rates

On Wednesday, 18 September 2002, the Central Bank of Malta launched the official fixing of interbank rates for the Maltese Lira. These rates will be referred to as MIBOR (Malta Interbank Offered Rate) and MIBID (Malta Interbank Bid Rate) and will provide an interest rate benchmark for both liquidity offered and bid by the credit institutions in the Maltese lira money market on an unsecured basis. MIBOR and MIBID are to provide a basis for the pricing of money market and foreign exchange products. Interbank fixing will be conducted in the overnight, one week, one month, two months, three months, six months, nine months and twelve months tenors. MIBOR and MIBID are fixed by the Central Bank every Wednesday and on the day following a change in the Central Bank’s Central Intervention Rate. MIBOR and MIBID are computed by the Central Bank on the basis of a simple average of all the interest rates communicated to the Central Bank during the fixing session. The rates are provided by the four credit institutions licensed under the Banking Act that are active in the local interbank market for Maltese Lira. These banks have been quoting interbank rates since the mid-1990s.

Central Bank monetary operations

The banking system was once again characterised by excess short-term liquidity for week ending 20 September 2002, albeit at a lower level than the previous week. This week’s surplus was mainly due to maturing term deposits amounting to Lm43.4 million and the injection by the Central Bank of Lm1.6 million against purchases of foreign currency.

Consequently, the Central Bank held a term deposit auction on Friday, 20 September 2002. During this auction, Lm33 million were absorbed, Lm10.4 million less than the amount maturing on the same day. As a result, outstanding term deposits decreased from Lm97.9 million to Lm87.5 million. The latest auction was carried out at the weighted average rate of 3.95%, being the floor of the interest rate band of 3.95% - 4.05% at which the Bank conducts its weekly auctions for 14-day money.

Malta Government Treasury Bills

This week the Treasury invited tenders for 91-day Treasury bills, to mature on 20 December 2002. Applications amounted to approximately Lm55.9 million, while the Treasury issued Lm19.4 million worth of Treasury bills. Since the volume of Treasury bills maturing on the same day amounted to Lm15.8 million, the outstanding bills increased to Lm186.4 million.

The weighted average rate resulting from this auction was 3.9623%, which was marginally lower than previous rate of 3.9629%. This rate corresponds to a price of Lm99.0218 per Lm100 nominal.

On Tuesday the Treasury invited tenders for 91-day Treasury bills to mature on 27 December 2002. For the following week the Treasury will invite tenders for 6 month bills to mature on 4 April 2003.

During the week under review, turnover in the secondary market amounted to Lm198,000 which was lower than last week’s volume of Lm830,000. The latest turnover consisted of net purchases effected by the Central Bank totalling Lm144,000 in its role as market maker. No deals were effected outside the Central Bank.