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MNB allocates combined €224 mln in swaps

The Hungarian Central Bank (MNB) said it allocated €124 million in a six-month fixed-price swap tender on Monday. Demand exceeded the €100 million the bank offered and allocated in the first tender of its three-month floating-price FX swap facility, also held on Monday.

The bank offered its fixed-price six-month euro-for-forint swap facility at a 1,176.20 swap points on Monday, compared to 1,020.47 swap points in the first such tender held on March 2. There was no allocation in the first six-month tender.

The MNB received bids for €240 million of three-month swaps, which also provide euro liquidity, but accepted only the originally offered €100 million. All accepted bids were at a price of 530 swap points, below the maximum 555.27 swap points set for the tender.

The two tenders, operated once a week, are among the recently introduced FX liquidity-boosting facilities which the MNB intends to make more attractive as part of moves designed to support the forint, according to a statement issued on Sunday, after extraordinary Monetary Council meetings held over the weekend.

The MNB said on March 2 it will offer euro liquidity up to a combined €2.19 billion in its new three-month floating-price tenders which will be available to all domestic banks with a reserve obligation from March 9. The MNB said that the minimum implied euro yield (expressed in maximum swap points) will exceed the implied euro yield of the fixed-price six-month swap tenders, introduced on March 2, by at least 50 basis points.

Seven domestic banks opted to utilize the six-month EUR/HUF swap facility up to a combined €2.81 billion. Unlike the three-moth tenders, the participants of the six-month tender had to agree to certain conditions, such as keeping domestic business lending stock as well as net external liabilities at least at a level at the end of last year, and drawing in long-term net external funds level with their utilization of the six-month swap facility.

Similar to its other euro-forint swap facilities, the MNB uses 110% of the prevailing exchange rate as a technical rate for the three- and six-month swap transactions. The transactions are revaluated daily, and the MNB will move funds between the banks' collateral and money accounts in a way to ensure 10% coverage of the MNB on the collateral account, taking into account the clients' other euro-forint swap deals with the central bank too. It will pay banks the central bank base rate on the balance of their collateral account.

From March 9, the MNB is using net settlement with clients when calculating dues/obligations in any one currency on the same value day from any of its euro-forint swap facilities.

The weekly three- and six-month EUR/HUF swap tenders are in addition to the MNB's two O/N swap facilities which provide euro liquidity for forints and have operated daily since last October: a fixed-rate O/N swap facility providing euro liquidity on the back of a €5 billion ECB facility and a two-way O/N swap tender in which the MNB acts as an intermediary among banks. The MNB has also operated a one-week swap tender, providing Swiss franc liquidity for euros, available once a week under an agreement with the Swiss central bank since the beginning of February. (MTI – Econews)