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Demand revives for Hungary central bank three-month FX swaps

The National Bank of Hungary (MNB) allocated €150 million three-month floating rate EUR/HUF swaps at its weekly tender on Monday. Demand for the swaps revived after dropping almost to nil in the previous three weeks.

On Monday the MNB offered the usual maximum of €400 million three-month swaps at a maximum 200.36 swap points, and allocated the €150 million at an average 196.67 swap points. With €50m in expiries, the outstanding volume will rise to €1.037 billion on the July 27 settlement day, Econews calculated.

The weekly tenders attracted unusually high bids between late June, reflecting uncertainties surrounding Greece. Demand reached an all-time high at €624 million on June 20, when bids surpassed the available maximum for the first time since the end of 2010.

The stock was the highest, at €1.922 billion, 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 for most of February, interest for the central bank swaps revived in March, and 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.