MSE | Wednesday, 29 August 2007

Increase in bank liquidity

Money Market Report for the week ended Friday 24 August 2007

Central Bank Monetary Operations
On Friday, 24 August 2007, the Central Bank of Malta conducted a seven-day term deposit auction absorbing Lm116 million from the banking system. This was Lm8.2 million more than the Lm107.8 million that matured on the same day. The interest rate that resulted from the auction was 4.20%, which is the floor of the interest rate band at which the Bank is currently conducting its term deposit auctions.
The net absorption of funds was in response to an increase in liquidity in the banking system during the week under review. The factors contributing to this were net maturing Treasury Bills affecting the banking system worth Lm7.6 million, a Lm4.6 million contraction in currency in circulation, Government direct credits amounting to Lm2.7 million and the net sale of MGSs on the secondary market worth Lm2.1 million. A negative net clearing of cheques of Lm5.9 million partly offset these liquidity-boosting factors.

Interbank Market
During the week one interbank deal was struck in the overnight tenor at a rate of 4.2%.

Treasury Bill Market
In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 23 November 2007 and 182-day bills maturing on 22 February 2008. In respect of the former, out of the Lm19.84 million worth of bids submitted, Lm447,000 were accepted, while in the case of the latter, out of the Lm17.58 million worth of bids submitted, Lm6.56 million were accepted. As Lm16.55 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by Lm9.53 million to Lm173.1 million.
The latest 91-day yield resulting from the week’s Treasury bill auction was 4.369%, down by 1.2 basis points from the 4.381% registered on similar bills auctioned on 17 August 2007. This represented a bid price of 98.9077 per 100 nominal. The latest 182-day yield was 4.488%, down 0.3 basis points from the 4.491% registered on similar bills auctioned on 10 August 2007. This represented a bid price of 97.7814 per 100 nominal.
On Tuesday the Treasury invited tenders for 91-day bills and 273-day bills maturing, respectively, on 30 November 2007 and 30 May 2008.
Treasury bill trading on the Malta Stock Exchange amounted to Lm669,000, while there were no Off-Exchange transactions. Of the total turnover, Lm369,000 worth of transactions were conducted by the Bank in its role as market maker.