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Demand for NBH three-month FX swap tender falls to nil again

Demand for the National Bank of Hungary (MNB)'s three-month floating rate EUR/HUF swaps dropped to nil again in a sign that liquidity on the interbank swap market is back to normal.

The previous two of the weekly tenders attracted unusually high bids reflecting uncertainties surrounding Greece.

The MNB offered the usual maximum of €400 million three-month swaps at a maximum 199.20 swap points on Monday. With €7 million in expiries, the outstanding volume will drop to €1.012 billion on the July 6 settlement day, Econews calculated.

On June 20, turbulence in the eurozone drove demand to €624 million, the highest level since the facility was introduced in March 2009, with bids surpassing the available maximum for the first time since the end of 2010. Demand fell but was still a high €162 million last week.

The stock reached an all-time high, of  €1.922billion, at the end of 2010 as liquidity on the interbank swap market narrowed due to rising swap market spreads and seasonal factors. After no bids were submitted between February 14 and February 28, interest for the central bank three-month EUR/HUF swaps revived in March and was varied in April and May before picking up again in June.

The MNB started to offer three-month floating-price EUR/HUF swaps and six-month fixed-price EUR/HUF swaps to banks weekly in March 2009. The fixed-price six-month EUR/HUF swap facility ran out as planned by the end of 2010. The bank also offered one-week CHF/EUR swaps weekly between February 2009 and January 2010.

The bank has been operating one-day FX swaps daily since October 2008. The swap facilities were launched to ease Hungarian banks' access to FX financing.