29 AUGUST 2001

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Money Market Report 20-24 August

- lower inter-bank activity

Central Bank Monetary Operations
During the week under review, the level of short-term liquidity picked up considerably when compared to the previous week. The main reason behind this was the Lm28.5 million injected in the system the previous week. This operation helped the banks to build up an excess in the Reserve Deposit accounts, which they are legally bound to hold with the Central Bank.

The Central Bank of Malta accordingly held a 14-day Term Deposit to absorb the excess liquidity in the banking system. However, no bids were submitted during the auction, as banks preferred to maintain their excess in view of forthcoming commitments.

The latest available 14-day Term Deposit rate thus remained at 4.74 per cent, which had resulted from the auction session of 13 July 2001.

Inter-bank Market
The inter-bank market was characterised by a sharp drop in the volume transacted, compared to the Lm12.5 million dealt the week before. During the period reviewed only one deal amounting to Lm0.9 million was transacted, for a period of seven days, at the rate of 4.78 per cent. This was slightly higher than the previous rate of 4.7703 per cent.

Malta Government Treasury Bills
In the primary market for Treasury Bills, Government issued the equivalent of Lm6.8 million, in 91-day Treasury Bills. While this amount was less than that applied for, it was higher than the Lm4.6 million maturing on the same day. As a result the outstanding balance of Treasury bills rose to Lm180.4 million from the Lm178.2 million of the previous week.

The weighted average yield for the 91-day tenor resulting from this auction increased to 5.0994 per cent from the previous rate of 5.0900 per cent. This latest yield corresponds to a weighted average bid price of Lm98.7446 per Lm100 nominal.

On Tuesday 29 August, the Treasury received applications for the tender of 91-day Treasury Bills maturing on 30 November 2001. These bills issued on Friday 31 August, coincide with a same day maturing amount of Lm7.52 million. For the following week, on Tuesday 4 September, the Treasury will receive applications for 91-day bills to be issued on Friday 7 September to mature on 7 December 2001.

Trading in the secondary market for Treasury Bills amounted to Lm0.14 million, double the amount of Lm0.7 million of the previous week. All trading was conducted with the Central Bank in its role as market maker.

The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07
Tel: (356) 382741-3, 382745-6 | Fax: (356) 385075 | e-mail: editorial@networkpublications.com.mt