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MNB swap stock to fall HUF 130 bln after tender

The National Bank of Hungaryʼs stock of FX swaps, which the central bank uses to pump liquidity into the banking sector, will fall by about HUF 130 billion to HUF 2,055 bln as the result of a weekly tender held on Monday, state news wire MTI reports.

MNB received bids for all four maturities - one-, three-, six- and 12-month swaps against euros - at the tender, but accepted none of them.

MNB data show about HUF 130 bln of the swaps - HUF 16.83 bln of the one-month, HUF 61.66 bln of the three-month, HUF 26.52 bln of the six-month and HUF 25.1 bln of the 12-month -will mature February 5, the value date of the tender.

After the redemptions, the stock will comprise HUF 26.6 bln of one-month, HUF 270.2 bln of three-month, HUF 668.8 bln of six-month and about HUF 1.09 trillion of 12-month swaps.

 The swap stock was also cut at the previous two tenders, which some market players interpreted as policy tightening.

Responding to this reading of events, MNB experts have stressed that "a change in the swap stock may not in itself be considered as a guide from the perspective of the monetary policy stance".

In a paper published on Thursday, MNB staff cautioned that "isolated assessments" of changes to the FX swap stock can be "especially misleading" in periods during which factors autonomous of the central bank have a marked impact on banking sector liquidity. They noted that banking sector liquidity had risen significantly in recent months, with stock of central bank O/N deposits climbing over HUF 1 tln in January.

The forint gained ground immediately after the tender results were announced on Monday, firming from 337.56 to 336.83 against the euro.