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The MNB will announce its monetary policy interest rate swap MIRS facility at fixed rate tenders

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24 January 2018 - The Magyar Nemzeti Bank has modified the monetary policy interest rate swap (MIRS) facility terms and conditions. Accordingly, it will announce its monetary policy interest rate swap facility (MIRS) at fixed rate tenders. The allocation among banks will be based upon balance sheet totals. The introduction of fixed rate tenders will strengthen monetary transmission thus ensuring that loose monetary conditions have their effect not only at the short but also at the longer end of the yield curve in line with the decision by the Monetary Council.

The Magyar Nemzeti Bank modified the monetary policy interest rate swap facility terms and conditions effective from 29 January 2018. Accordingly, the central bank will hold fixed rate tenders instead of the variable rate tender applied at the first tender in the case of the MIRS facility. Similarly to the three-month deposit tenders, the allocation among banks will be based upon balance sheet totals.

Due to the characteristics of the variable rate tender applied at the MIRS tenders on 18 January 2018, the yield orienting role of the facility did not have the desired effect, as a result of the outstanding demand the MNB could not accept offers submitted at lower yield rates. 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 at the short, but also at the longer end of the yield curve in line with the decision by the Monetary Council.

According to the decision by the Monetary Council on 21 November 2017 the allocation amount for MIRS will be HUF 300 billion in the first quarter of 2018, which may amount to as much as HUF 1200 billion in annual terms. The MNB offers the MIRS facility to the banks with even distribution at the tenders to be held every two weeks.