Weekly Developments in Financial Markets – 06

FINANCIAL MARKETS DEPARTMENT

WEEKLY DEVELOPMENTS IN THE FINANCIAL MARKETS

(03 – 10 DECEMBER 2021)

Main highlights

Gross official foreign exchange reserves increased by about $ 51.6 million to close the review period at US $ 448.3 million (1.79 months of imports).

The Kwacha depreciated against the US dollar and South African rand, but appreciated against the British pound and the euro. Local unit lost 0.14% (K1.19) to close the review period at K824.1690 for the US dollar.

Liquidity conditions on the domestic money market remained very tight with the daily average excess reserves of commercial banks, before borrowing from the central bank, with a negative average of K 82.5 billion per day.

Primary treasury bill auctions continue to be significantly subscribedand sub-assignedwhile the primary treasury bill auctions were oversubscribedand over-allocatedfollowing a reopening on three commercial paper. The cumulative ratio of allocations of Treasury securities to issues planned during the 2021/22 financial year, at 45.01% against 41.61%.

Gross official foreign exchange reserves increased by approximately US $ 51.6 million to end the review period at US $ 448.3 million (1.79 months of imports). This follows an increase of $ 7.2 million recorded in the previous week.

During the review week, the retail foreign exchange market recorded weaker but noticeable inflows given the levels generally observed during the lean season. The ADB bought a total of US $ 29.42 million compared to US $ 30.23 million recorded in the previous week.

The Kwacha depreciated against the US dollar. Ongoing, the local unit lost 0.14% (1.19K) to close the review period at 824.1690K to the US dollar.

During the same period, the Kwacha gained value against the British pound and the euro but recorded a loss against the South African rand. The Kwacha appreciated 0.05% (63 tambala) and 3.01% (K32.39) against the British pound and the euro respectively. The local currency lost 1.66% (0.95K) against the South African Rand.

Liquidity conditions on the national money market remained very tight during the period under review as captured by the daily average of excess reserves of commercial banks, before borrowing from the central bank, which stands at less than K82.5 billion, against negative K84.6 billion observed the previous week. Interbank market trading increased to K 9.6 billion per day from K 6.3 billion per day recorded in the previous week, while access on the Lombard facility declined slightly to 106.9 billion K per day against 109.2 billion K per day.

IBR remains firm and closely aligned with policy rate at 11.98 percent. Thus, the IBR continues to be located in the target corridor of + 0.2 / -4.0percentage points around the key rate.

2

Billion has been subscribed and fully allocated against a planned issuance of K20.0 billion. This represents an allocation to planned issuance ratio of 161.67%. These changes have led to an increase in the cumulative ratio of allocation of Treasury securities on the issue planned during the 2021/22 financial year, to 45.01% against 41.61%, and to an increase in the ratio of allocation on subscription, at 89.93% against 88.71%.

Central bank transactions with commercial banks were down during the review week. A total of approximately K 11.3 billion was injected through net open market operations which included net access to the Lombard facility in the amount of K 3.1 billion and pensions totaling 8 , 2 billion K. On the other hand, the operations of the State withdrew 28.4 billion K through the net issuance of domestic debt securities in the amount of 30.0 billion K, offset by net expenditure of K 1.6 billion. A further withdrawal of liquidity from the banking system through withdrawals of foreign currency from central bank commercial banks to meet customer demands amounting to K 3.3 billion and operations net exchange rates of the central bank of about K 2.8 billion.

Primary T-bill auctions continue to be significantly under-subscribed and under-allocated while primary T-bill auctions have been oversubscribed and over-allocated following a reopening of three T-bills. In the primary treasury bill auction, a total of K 7.3 billion was subscribed and fully allocated against a planned issuance of K 17.0 billion. This represents an allocation to planned issuance ratio of 45 , 60%. Of the primary treasury bill auction, a total of K32.3

Warning

Reserve Bank of Malawi published this content on December 17, 2021 and is solely responsible for the information it contains. Distributed by Public, unedited and unmodified, on December 17, 2021 03:08:08 PM UTC.

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