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MNB to move two-week bond auctions to Wednesday

The National Bank of Hungary (MNB) will hold the regular weekly auctions of its main liquidity instrument, the two-week bonds, on Wednesdays instead of Tuesdays starting July 1, the bank said on Monday.

The MNB will also move from Tuesdays to Wednesdays its collateralized two-week and six-month loan tenders, also held weekly.

While the auctions and tenders will be held one day later, settlement of the three instruments will continue to occur on Wednesday. The final time for the same-day settlement is 4:30 pm.

The changes are linked to the change of the day of the meetings of the Monetary Council, the central bank's main decision-making body, from Mondays to Tuesdays. The conditions of the bond auction and the loan tenders are affected by the Council's rate decisions, which will become valid as before from the day following the rate-setting meetings.

Of the three policy tools, the two-week zero coupon MNB bond pays interest equal to the prevailing central bank base rate.

For two-week bond auctions, submitting bids will be moved to an earlier period, between 9 am and 10:30 am, from the present time of between 10 am and 12 am. Bond auction results will be announced by 1 pm instead of 2 pm.

There will be no similar changes in the intraday timing of the two collateralized loan tenders, which have not been used in the past 14 months.

The two loan tenders were introduced in autumn 2008 to ease the liquidity squeeze developed at the time of the financial crisis. The MNB offers two-week loans without a volume limit at a fixed rate of the prevailing central bank base rate plus 50 basis points, and it offers at most HUF 50 billion of the six-month loans at a variable rate. The MNB has not granted loans from either instruments since March 2010, refusing the last bids it received for the six-month instrument in August-September 2010.