Money market report for week ending 19 August 2005
Surplus liquidity in the banking system continued its upward trend in the week ended 19 August 2005. Credit institutions started the maintenance period with an overall surplus in the reserve deposit accounts which they are legally bound to hold with the Central Bank of Malta. Furthermore, there was also the sale of foreign currency against the Maltese lira by the credit institutions to the Bank totalling Lm5.9 million, and Government direct credits of Lm4.3 million which also contributed to the increase in liquidity.
Accordingly, on Friday 19 August, the Bank conducted a 14-day term deposit auction. An aggregate of Lm21.3 million was absorbed from the banking sector, Lm12.8 million more than the Lm8.5 million worth of term deposits that matured on the same day. After this auction, the Bank’s outstanding term deposits increased from Lm22.1 million to Lm34.9 million. The rate resulting from the latest auction was 3.20%, being the floor of the interest rate band (3.20% - 3.25%) at which the Bank conducts its term deposit auctions.
Interbank activity picked up considerably in the week under review and six deals totalling Lm16.5 million were transacted. Rates remained broadly unchanged from previous levels.
Treasury bill market
In the primary market, the Treasury invited tenders for 91-day Treasury bills to mature on 18 November 2005. Out of the Lm15.9 million worth of bids submitted, Lm5.9 million were accepted by the Treasury. Given that the same amount of bills matured during the week under review, the outstanding balance of Treasury bills remained the same at Lm202.2 million.
The latest rate resulting from this auction was 3.2632% which also remained unchanged from the previous 91-day rate for bills issued on 5 August 2005. The latest rate reflects a bid price of Lm99.1930 per Lm100 nominal.
This week the Treasury will receive applications for 182-day bills to mature on 24 February 2006.
Turnover in the secondary market amounted to Lm1.2 million. Most of this week’s turnover was transacted with the Bank in its role as market-maker, while only Lm0.1 million was traded outside the Bank.