BUDAPEST Aug 15 Hungarian Treasury bill yields
could rise from record low levels as their recent plunge was
probably caused by the temporary impact of a change in the
central bank's money market tools, a central bank director was
quoted as saying on Friday.
As of Aug. 1, the central bank opened a new two-week deposit
facility for local banks instead using the two-week bills which
were its main market liquidity management tool previously.
The yields set at Hungary's Treasury bill auctions fell
sharply in past weeks even though longer-term government debt
yields rebounded from months of falls due to concerns that the
U.S. Federal Reserve could signal a rise in interest rates in
Three-month bills were sold at an average yield of 1.47
percent on Tuesday, well below the central bank's 2.1 percent
Since the central bank announced the two-week deposit
facility in April, foreign banks and domestic fund managers have
had to look for alternative places for their investments as they
do not have access to the new facility.
Mihaly Hoffmann, the director responsible for the central
bank's liquidity management tools and foreign currency reserves
said there had been signs that domestic funds started to prepare
for the shift late, only around the end of July.
"In theory, this late adjustment may have played a role in
that demand for short-expiry discount Treasury bills was
stronger than expected and that could have contributed to the
decoupling of short-term government debt yields from the base
rate," he told business news portal Portfolio.
"We believe... that after a temporary period the situation
can normalize," he added.
The bank made the changes to encourage market players to
channel funds from its main liquidity management tool into
The shift has so far cut the amount of funds held in the
bank's main liquidity facility by about 400 billion forints and
the adjustment continues, Hoffmann said.
The bank could meet its goal of a 600-1000 billion forint
reduction if demand for forint-denominated government bonds
remains strong, the director added.
The stock of the central bank's two-week deposits was 4.977
trillion forints after a weekly tender held on Wednesday.
(Reporting by Sandor Peto; Editing by Toby Chopra)