Demand for central bank three-month FX swaps dries up

Analysis

The National Bank of Hungary (MNB) received no bids for floating-rate three month EUR/HUF swaps at its regular weekly tender on Monday.

The MNB offered the usual €400m floating-rate three month EUR/HUF swaps at a maximum price of 280.66 swap points on Monday.

With €30m expiring on the February 1 settlement day, the stock outstanding of the three-month EUR/HUF swaps will drop to €2.315bn on Wednesday from an all-time high of €2.345bn on January 25.

Demand for the swaps dried up after dropping to a still high €295m on January 23 from a peak of €560m on January 16. Interest in the facility rose gradually since early October and was high for most of December and January.

The only tender without bids since the start of October was the one on December 27 when banks used, to the tune of €290m, a one-off tender in which the MNB offered one-week swaps to ease a seasonal year-end liquidity squeeze insted of the three-month regular facility.

The MNB operates two EUR/HUF swap facilities to banks, a one-day one operated daily and the three-month one once a week on Mondays.

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