Money Market Report for the week ended Friday 6 July 2007
Central Bank Monetary Operations
On Friday, 6 July 2007, the Central Bank of Malta conducted a seven day term deposit auction, absorbing Lm78.3 million from the banking system. This was Lm7.3 million more than the Lm71 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 sales of Malta Government stocks amounting to Lm4.4 million, direct credits, mainly related to interest payments, of Lm4.2 million, a Lm2.1 million contraction in currency in circulation and the fact that credit institutions began the week with a surplus in their statutory reserve deposit accounts with the Bank. Partly offsetting these factors were purchases of foreign currency by credit institutions amounting to Lm3.8 million and a negative net cheque clearing totalling Lm1.4 million.
Interbank Market
In the interbank market two deals, for a total of Lm3.8 million, were conducted in the overnight tenor. The weighted average rate at which the deals were struck was 4.25%, up 5 basis points from the rate on the previous deal in the same tenor, that was conducted on 28 June 2007.
Treasury Bill Market
In the primary market for Treasury bills, the Treasury invited tenders for 182-day bills maturing on 4 January 2008. Out of the Lm16.5 million worth of bids submitted, only Lm8 million were accepted by the Treasury. As Lm9.8 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by Lm1.8 million to Lm194.4 million.
The latest 182-day rate resulting from the week’s Treasury bill auction was 4.415%. This was 10.3 basis points higher than the rate on similar bills issued on 18 May 2007 and reflected a bid price of 97.8167 per 100 nominal.
On Tuesday, the Treasury invited tenders for 91-day bills and 364-day bills maturing on 12 October 2007 and 11 July 2008, respectively. The following week the Treasury will invite tenders for 91-day bills maturing on 19 October 2007.
Treasury bill trading on the Malta Stock Exchange amounted to Lm566,000 during the week, of which all but Lm8,000 involved the Bank in its role as market maker. Off-Exchange turnover amounted to Lm500,000, totally transacted with the Bank in its role as market maker.
