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Tender lifts ‘fine-tuning’ FX swap stock

The National Bank of Hungary (MNB) allotted HUF 125 billion of forint swaps against euros at a tender on Monday, bringing the total stock to HUF 1,396 bln, state news wire MTI reported.

The central bank introduced the FX swaps a year ago as a "fine-tuning instrument" for market liquidity after it put a cap on placements in three-month deposits, its main sterilization instrument, MTI noted.

At the latest tender on Monday, the MNB allotted HUF 25 bln of one-month swaps, HUF 50 bln of three-month swaps and HUF 50 bln of twelve-month swaps.

Banks bid EUR 100 mln for the one-month swaps, EUR 170 mln for the three-month swaps, and EUR 765 mln for the twelve-month swaps.

The tender will raise the total stock by HUF 84 bln as HUF 41 bln of one-month swaps will expire on the value date of the tender on November 15.

The total swap stock will now comprise HUF 150 bln of one-month, HUF 274 bln of three-month, HUF 223 bln of six-month, and HUF 749 bln of twelve-month swaps at the value date.

Central bank policy-makers recently decided to raise the MNBʼs stock of forint swaps against euros while assigning greater importance to the maturity structure of the stock with the aim of providing "the loosening effect up to the longest possible section of the yield curve as soon as possible," recalled MTI.