Minister says Malta’s tourism earnings are on a ‘plateau’ and looks forward to 2003
- Lower 91-day Primary Treasury Bill Rate

Central Bank Monetary Operations

Excess short-term liquidity, that has characterised the banking sector since the beginning of the year, increased in the week ending 15 November 2002. This surplus was mainly due to maturing term deposits amounting to Lm 73 million. Furthermore the credit institutions started the new maintenance period covering the period 14 November to 15 December 2002 with a cumulative excess in the reserve deposit accounts which they are required to hold with the Central bank. However, this was partly mitigated by the fact that the Central Bank sold foreign currency against Maltese Lira in the foreign exchange market to the tune of Lm7 million.

Accordingly, on Friday 15 November 2002, the Central Bank of Malta invited tenders for a 14-day term deposit auction to absorb this liquidity. During this auction, Lm79.5 million were absorbed, Lm6.5 million more than the amount which matured during the same day. As a result, outstanding term deposits increased from Lm108.4 million to Lm 114.9 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 Central Bank conducts its weekly auctions for 14-day money.

Inter-bank Market

In the week under review only one inter-bank deal was transacted in the inter-bank market. This was transacted in the overnight tenor at a rate of 3.9%, down from the previous overnight rate of 3.97%.

Malta Government Treasury Bills

In the primary market for Treasury bills, Government invited tenders for 91-day Treasury bills to mature on 14 February 2003. Applications amounted to approximately Lm29.3 million, with the Treasury issuing only Lm5 million worth of bills. Since approximately Lm5 million Treasury bills matured on the same day, outstanding bills remained at Lm195.9 million.

The weighted average rate resulting from this auction was 3.9001%, down from the previous 91 -day tenor of 3.9300%. The latest rate corresponds to a price of Lm99.0370 per Lml00 nominal. The yield resulting from this auction is approximately 0.05 of one percentage point lower than the Central Bank's absorption floor. This further reflects the excess liquidity prevailing in the banking system.

On Tuesday the Treasury invited tenders for 91-day Treasury bills to mature on 21 February 2003. For the following week, the Treasury will receive applications for 91-day bills to mature on 28 February 2003.

During the week under review, turnover in the secondary market amounted to Lm57,000, significantly lower than Lm2.5 million of the previous week. Net purchases by the Central Bank amounted to Lm37, 000 in its role as market maker. No deals were effected outside the Bank.