The first, highly oversubscribed offer of interest rate swaps from the National Bank of Hungary (NBH) suggested that Hungarian banks might have increased interest in buying longer term Hungarian government paper.

The NBH announced in April that it would replace its main two-week liquidity bills with two-week deposits from August 1, in a bid to shepherd local banks towards purchasing more government debt. If successful, the method might drive yields further down, deterring yieldhunting foreign investors, analysts say.

This outlook could have contributed to the forint’s fall on Thursday, exacerbating the trend of the last few days on the prospect of NBH continuing its easing cycle, and of huge mandatory compensations to be paid by heavily taxed banks to foreign debtors.

Source www.hungarymatters.hu

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