Retail eurobond, EU funding inflow exceed IMF loan repayment in January
Forint liquidity of the Hungarian banking system rose in January after drops in the previous three months, and central bank foreign assets rose as the proceeds from a euro-denominated domestic retail bond exceeded debt repayments to the IMF, the National Bank of Hungary (MNB) said in a report on its monthly preliminary statistical balance on Tuesday.
The government repaid SDR 527 million (HUF 179 billion) on its 2008 loan to the IMF on January 25, about two weeks ahead of schedule while the State Treasury sold little less than €1 billion of its domestic euro-denominated bond last month by January 25. These transactions and transfers received from the European Union raised the central government fx deposits, as well as the central bank's international reserves.
Including the effect of a small, HUF 2.5 billion central government deficit in January, average January central government deposits rose nearly HUF 150 billion from December to HUF 1,616 billion. The rise was bigger: HUF 422 billion in an end-of-month comparison, and reflected almost exclusively transactions, to HUF 1,800 billion. The central government's foreign exchange deposits rose only HUF 22.3 billion, to HUF 957 billion by the end of January, while forint deposits almost doubled to HUF 843 billion, suggesting that the treasury exchanged part of the net fx proceeds into forints.
An end-of-month comparison shows that transactions raised the MNB's foreign assets by HUF 294 billion while evaluation, including exchange rate changes reduced their forint value by HUF 114 billion in January, and they stood at HUF 10,272 billion at the end of last month. Average foreign assets rose by HUF 380 billion from November to HUF 10,344 billion. Forint liquidity of Hungary's banking sector rose as both foreign and domestic investors increased their stock of two-week MNB bonds, and banks' average one-day deposits with the central bank fell.
The average stock of two-week MNB bonds held by foreign (non-resident) investors rose by a limited HUF 23 billion to HUF 330 billion, up from a one-year low reached in December. Residents' average stock of the bonds rose HUF 261 billion to HUF 3,931 billion. Banks average one-day deposits with the MNB fell, in contrast, by HUF 125 billion from December to HUF 71 billion. The balance on banks' current accounts with the MNB fell just HUF 3 billion to average HUF 475 billion. The average balance exceeded the January reserving obligations by HUF 5.8 billion.
Foreign liabilities, not including MNB two-week bonds held by foreigners, fell HUF 169 billion on transactions and fell a further HUF 18 billion on exchange rate and other evaluation changes, to HUF 836 billion at the end of January. Average foreign liabilities fell HUF 35 billion to HUF 817 billion. There were no new allocations on the MNB's two-year loan facility to banks introduced in April. The stock is unchanged at HUF 122 billion since August.
Average fx swaps outstanding were HUF 15.3 billion in January, on the effect of a one-off two-week EUR/HUF tender on December 20 to ease the usual year-end fx liquidity squeeze. The MNB allocated €400 million at the tender. Average cash in circulation fell by HUF 63 billion in January to HUF 2,676 billion. One-day rates temporarily rose near the upper end of the MNB's interest rate corridor, boosted by banks' MNB bond stock but fell back to the lower half of the corridor in the last week of the month.
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