MNB fine-tunes new interest rate swap facility


Jessica Fejos

In the wake of the first tender for its new monetary policy interest rate swaps (MIRS), the National Bank of Hungary (MNB) on Wednesday said it will make tenders fixed-rate, rather than variable-rate, and link allocations to the size of biddersʼ assets, state news agency MTI reported.  

The MNB held the first tender for the monetary policy interest rate swaps (MIRS) on Thursday, January 18.

"Due to the characteristics of the variable-rate tender applied at the MIRS tender on January 18, the yield-orienting role of the facility did not have the desired effect, and as a result of the outstanding demand, the MNB could not accept offers submitted at lower yield rates," the MNB explained.

"The fixed-rate tender to be introduced, where the MNB only accepts offers at yields included in the call for tender, will ensure that the yield-orienting role has a more pronounced effect, and that the loose monetary conditions will have their effect not just at the short, but also at the longer end of the yield curve, in line with the decision by the Monetary Council," the central bank added.

MNB policy-makers decided in November to launch the MIRS facility, setting a HUF 300 billion allocation for the first quarter of 2018.

At the first tender, the central bank allocated HUF 35.0 bln of five-year and HUF 40.0 bln of ten-year MIRS. The allocation of the five-year swaps was in line with the announced offered amount, but the allocation of the ten-year swaps was more than double the HUF 15.0 bln announced amount. Lendersʼ bids came to HUF 295.6 bln for the five-year MIRS, and HUF 277.5 bln for the ten-year swaps.  

The ten-year benchmark yield calculated by the Government Debt Management Agency (ÁKK) rose 12 basis points on the day after the first MIRS tender, and by another 3 bps on Monday, but fell 8 bps on Tuesday. 

The MNB is holding tenders for the MIRS facility every other Thursday.


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