Money market report 26 - 30 August

- Lm500,000 turnover in secondary Treasury bill market

Malta Government Treasury Bills

During the week under review the Treasury invited tenders for 91-day Treasury bills, to mature on 29 November 2002. Applications amounted to approximately Lm39.3 million, while the Treasury issued only Lm13 million worth of bills. Since Lm15 million worth of Treasury bills matured on the same day, outstanding bills dropped by Lm2 million to Lm180.9 million.

The weighted average rate resulting from this auction was 3.9991 per cent, exactly the same as last week’s 91-day rate. This rate corresponds to a price of Lm99.0128 per Lm100 nominal.

On Tuesday the Treasury invited tenders for 91-day Treasury bills to mature on 6 December 2002. For the following week, the Treasury will receive applications for 90-day Treasury bills maturing on 12 December 2002.

During the week under review, turnover in the secondary market amounted to Lm500,000, which consisted entirely of deals outside the Central Bank of Malta.

Central Bank monetary operations

In the week ending 30 August 2002, the banking system continued to experience excess short-term liquidity. This was mainly due to maturing term deposits amounting to Lm39 million, the injection of Maltese lira against purchases of foreign currency by the Central Bank totalling Lm8.9 million, as well as direct credits of Lm10.9 million, mainly relating to the payment of Government salaries and pensions. Furthermore the cumulative excess in the reserve deposit accounts which the banks are legally bound to hold with the Central Bank continued to accentuate this excess liquidity.

As a result, on Friday, 30 August 2002, the Central Bank of Malta invited tenders for a 14-day term deposit auction to absorb the excess liquidity in the market. During this auction Lm52.5 million were absorbed, or Lm13.5 million more than the amount which matured during the same day. As a result, outstanding term deposits increased from Lm88.5 million to Lm102 million. The latest auction was carried out at the weighted average rate of 3.95 per cent, being the floor of the interest rate band of 3.95 per cent - 4.05 per cent at which the Central Bank conducts its weekly auctions for 14-day money.

Inter-bank market

As in the previous week, no inter-bank deals were transacted in the local money market, which continues to reflect the surplus liquidity across the banking sector.