Money market report 14-18 October
- record high outstanding term deposits with the Central Bank

Malta Government Treasury Bills

In the primary market for Treasury bills, Government invited tenders for 91-day Treasury bills to mature on 17 January 2003. Applications amounted to approximately Lm39.6 million, while the Treasury issued only Lm9 million bills. Since Lm10 million worth of Treasury bills matured on the same day, outstanding bills decreased by Lm1 million to Lm187.4 million.

The weighted average rate resulting from this auction was 3.95 per cent, down marginally (0.0156 of one percentage point) from the previous auction in the 91-day tenor. The latest rate corresponds to a price of Lm99.0248 per Lm100 nominal.

On Tuesday the Treasury invited tenders for 91-day Treasury bills to mature on 24 January 2003. During the week under review, turnover in the secondary market amounted to Lm934,000, lower than Lm1,154,000 of the previous week. The Central Bank effected net purchases of Lm66,000 in its role as a market maker, whilst deals outside the Central Bank totalled Lm800,000.

Central Bank monetary operations

During the week ending 18 October 2002, excess short-term liquidity in the banking system continued to increase. This week’s surplus was mainly due to the maturity of Lm52 million term deposits and direct credits of 2 million relating mainly to the payment of pensions. Moreover, the credit institutions started the new maintenance period 15 October to 14 November 2002 with a cumulative excess in the Reserve Deposit accounts which they are legally bound to hold with the Central Bank.

Consequently, the Central Bank conducted a term deposit auction on Friday, 18 October 2002. During this auction the Bank absorbed Lm61 million, Lm9 million more than the amount which matured during the day. Accordingly outstanding term deposits increased from Lm109.8 million to a record high of Lm118.8 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. This reflects the surplus liquidity in the whole banking sector.