05 October 2005

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Business Today

Central Bank of Malta leaves official rates unchanged

On Thursday, 29 September 2005, the Governor of the Central Bank of Malta, following the monthly meeting with the Monetary Policy Advisory Council, decided to leave the Bank’s Central Intervention Rate unchanged at 3.25% (see HYPERLINK "http://www.centralbankmalta.com" www.centralbankmalta.com).
Liquidity in the banking system increased sharply in the week under review when compared to the previous week. This was mainly due to net maturing Treasury bills of Lm9.6 million and Government direct credits amounting to Lm5.1 million. There was also the sale of foreign currency against the Maltese lira by the credit institutions to the Central Bank of Malta amounting to Lm2.5 million and dividend payments of Lm2.8 million which increased liquidity further. Partially offsetting this increase in liquidity was a negative net clearing of cheques amounting to Lm2.4 million.
Accordingly, on Friday 30 September, the Bank conducted a 7-day term deposit auction. An aggregate of Lm80.5 million was absorbed from the banking sector, Lm40.5 million more than the Lm40 million worth of term deposits that matured on the same day. 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 auctions.
Interbank activity in the week under review amounted to Lm7.3 million, practically unchanged from last week’s level of deals transacted.

Treasury bill market
In the primary market, the Treasury invited tenders for 364-day Treasury bills to mature on 29 September 2006. Only Lm3 million of the Lm29.9 million worth of bids submitted were accepted by the Treasury. Given that Lm12.6 million worth of bills matured during the week under review, the outstanding balance of Treasury bills decreased by Lm9.6 million, from Lm184.1 million to Lm174.5 million.
The latest 12-month rate resulting from this auction was 3.3993%. This was 10.3 basis points lower than the previous 364-day rate for bills issued on 1 July 2005. The latest rate reflects a bid price of Lm96.7212 per Lm100 nominal.
On Tuesday, the Treasury received applications for 91-day bills to mature on 6 January 2006. For the following week, the Treasury will accept bids in the same tenor to mature on 13 January 2006.
Turnover in the secondary market decreased considerably from the previous week’s level of Lm5.7 million to Lm1.5 million. All trading was effected by the Bank in its role of market-maker.

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