MSE | Wednesday, 08 August 2007

Increase in bank liquidity

Money Market Report for the week ended Friday 3 August 2007

Central Bank Monetary Operations
On Friday, 3 August 2007, the Central Bank of Malta conducted a seven-day term deposit auction absorbing Lm94.1 million from the banking system. This was Lm2.6 million more than the Lm91.5 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 a Lm7.2 million contraction in currency in circulation and direct credits of Lm3.6 million. Partly offsetting these liquidity boosting factors was, a net negative cheque clearing of Lm7.2 million, purchases of foreign currency from the Bank amounting to Lm1.6 million and the fact that, during the week, credit institutions accumulated a shortfall in their statutory reserve deposit accounts with the Bank.

Interbank Market
In the interbank market, two deals in the overnight tenor and one in the 14-day tenor were conducted for a total of Lm11.8 million. The interest rate on the overnight deals was 4.25%, up by 5 basis points when compared with the rate on a similar deal conducted on 18 July. The interest rate on the 14-day deal was 4.26%, up by 1 basis point when compared to the rate on a deal in the same tenor conducted on 28 June.

Treasury Bill Market
In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 2 November. Out of the Lm19.7 million worth of bids submitted, only Lm0.667 million were accepted. Since no Treasury bills matured during the week, the outstanding balance of Treasury bills increased by Lm0.667 million to Lm192.8 million.
The latest 91-day yield resulting from the week’s Treasury bill auction was 4.441%. This was 3.6 basis points lower than the rate on similar bills issued on 27 July. This represented a bid price of 98.8899 per 100 nominal.
On Tuesday the Treasury invited tenders for 182-day bills maturing on 8 February 2008. The following week the Treasury will invite tenders for 91-day bills maturing on 16 November 2007.
Treasury bill trading on the Malta Stock Exchange amounted to only Lm 14,000. All transactions were conducted by the Bank in its role as market maker. No deals were transacted on an off-Exchange basis.

Malta Real-time Interbank Payment System (MaRIS) – July 2007
During the month of July, 4,936 payment messages were processed through MaRIS, for a total value of Lm1,603.0 million. Of these, 2,118 were payments on behalf of customers, for a value of Lm112.5 million, while 2,818 were interbank payments totalling Lm1,490.5 million. The daily average volume for the month was 224 messages for a value of Lm72.9 million. The highest number of messages was processed on 9 July with 295 messages, while the highest value was registered on 13 July with Lm309.2 million.

Further details can be found on the Central Bank of Malta website: www.centralbankmalta.com