On Wednesday, the Magyar Nemzeti Bank held a technical one-week foreign exchange swap tender providing forint liquidity. Banking sector liquidity fell temporarily, offset by MNB through holding a one-week tender. MNB accepted bids amounting to a total of HUF 150 billion on Wednesday, with a value date of Thursday. The one-week swap facility ensures that liquidity processes remain balanced and will contain turbulences in short-term yields.
On Wednesday, the Magyar Nemzeti Bank held a one-week foreign exchange swap tender providing forint liquidity. The announced quantity was EUR 308 million (HUF 99,73 billion), to which banks submitted bids amounting to total of EUR 1337 million (HUF 432,91 billion). The MNB entered into transactions with banks in a value of HUF 149,91 billion. A total of 8 banks participated in the tender.
In terms of banking sector liquidity, the announcement of the swap tender was justified by autonomous, fundamentally temporary developments. Hungarian Government Securities Plus purchased by households have been largely financed by the redemptions of earlier purchased government securities. However, a large part of government securities were redeemed not in the network of the Hungarian State Treasury, but through banks. This process led to the build-up of large amounts of retail government securities in banks’ balance sheets and to a reduction in interbank liquidity. Furthermore, payments of VAT by companies on Thursday also resulted in a further drop in liquidity. Overall, the two effects could have temporarily led to a level of banking sector liquidity which would not have been in line with the Monetary Council’s earlier decisions. The use of the one-week foreign exchange swap tender was of a technical nature, with which the MNB was able to efficiently support the banking sector’s liquidity management activity and the smoothing of movements in market yields.
The Magyar Nemzeti Bank is ready to flexibly modify the stock of FX swaps in order to ensure that interest rate transmission facility develops in line with the Monetary Council’s decision.