Interest rate on the MNB's 2-month deposit instrument rose moderately at today's tender

HUNGARY - In Brief 12 Oct 2022 by Istvan Racz
The MNB held its second weekly tender for its new 2-month deposit instrument today. The actual tenor of the depos will be shorter than two months, as the new placements will mature on December 1, the same way as the similar deposits made by banks a week ago. Banks handed in bids for HUF522bn, of which HUF506bn was accepted by the MNB, at a weighted average spread of 1.36%-point over the base rate. This was 24 bps higher than last week's result and 65 bps above today's fixing for the 2-month BUBOR. As a result of today's tender, some 26% of total banking sector liquidity (HUF 10399 bn yesterday) is now placed in 2-month deposits. There are altogether six instruments in which bank liquidity can be held at the MNB, including 1-week and 2-month deposits, reserves, 1-week discount bonds, current accounts (unsterilised funds) and O/N reverse (HUF to EUR) swaps. We consider this as a moderate, small-step tightening on the interest-rate front. However, overall monetary conditions are getting looser in these days, given the forint's seemingly uncontrolled weakening, which went on further today, especially in the one hour before the results of the deposit tender were announced.

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