Malta Government Stocks
Until 1991, the Central Bank of Malta's market-making role was conducted on an over-the-counter (OTC) basis. In January 1992 when the Malta Stock Exchange commenced operations, the Bank appointed its stockbroker to deal on the Exchange in Government Stocks in terms of section 3(1) of the Malta Stock Exchange (MSE) Statute. Consequently, the Central Bank of Malta, through the Government Securities Office, carries out its duties subject to Section 3 (sub-clauses 3.00.06 - 3.00.08) of the MSE Bye-laws.
On 9 July 2012 the MSE launched the new trading platform Xetra (Exchange Electronic Trading) to replace the Malta Automated Trading System (MATS) on which all listed securities on the Exchange were traded. Xetra is a leading trading platform in Europe operated by Deutsche Börse Group. Up to 5 October the settlement cycle for all listed securities on the Malta Stock Exchange (MSE) on the Regular Market was executed on a (T+3 basis). Following the migration to the T+2 settlement cycle launched on 6 October 2014 trades in all listed securities on the MSE are executable on a T+2 settlement cycle. The Government Securities Office publishes daily bid, offer prices and yields for each outstanding bond issued by the Malta Government for a T+2 settlement basis, following the move taken by the MSE together with most European markets. The maturity of these bonds (on date of issue) ranges from 5 to 25 years. Investors in Malta Government securities traditionally have tended to prefer to hold these securities to maturity. If securities are offered for sale by the public, the Bank's policy is to allow sufficient time for the market to take them up before intervening. If the Bank does not have significant amounts of any given stock in the secondary market, the Bank would not quote indicative offer prices for such stocks.
In the morning, the Government Securities Office publishes indicative bid, offer prices at which the Bank is prepared to buy or sell reasonable amounts. After the close of business on the MSE, the Government Securities Office publishes the closing bid, offer prices at which the Bank actually traded on that day or the price at which it was prepared to buy or sell reasonable amounts. The Bank is not bound to quote the published indicative prices during the trading session as these are subject to regular review in response to change in prices dealt in by other private brokers. The Bank also takes into account the underlying trends in market sentiment, namely it reserves the right to review prices during the course of the trading session in the light of changing market conditions. Besides the indicative bid, offer prices for each outstanding Malta Government Stock (MGS), the Government Securities Office also publishes the corresponding Yields-to-Maturity. Up to 2003, yields were computed according to the Actual/365 day convention. Since then, yields started to be computed on an Actual/Actual basis. As the coupon rate on MGS is paid on a six-monthly basis, the Yield-to-Maturity is not strictly comparable with that of other bonds whose coupon rate is paid annually. Accordingly, the Government Securities Office also publishes the corresponding International Securities Market Association (ISMA) Redemption Yield which represents an annualisation of the Yield-to-Maturity so that the yield on Malta Government bonds becomes comparable with that of bonds which pay interest on an annual basis.
The daily bid, offer prices and yields are published on the Bank's website, Reuters, Bloomberg and the local newspapers.