Local banks did not ask for any funds at the regular weekly repo auction of the HNB today for an eleventh consecutive week. Demand was low to non-existent during the entire 2017 with the exception of the summer months when the higher number of tourists and demand for local currency resulted in lower liquidity in the banking system. In December and January, however, the local currency has been strengthening so the central bank intervened twice to stem the appreciation pressures and boosted the available funds at local banks, which might have affected the interest in the repo auctions, in our opinion. The abundant liquidity is also seen in government security auctions, where demand remains high, showing there are no other attractive alternatives for placing funds, despite the overall falling yields. With the approaching Easter at the end of this month, which should boost tourism, the interest in the auctions might revive, we think.
The weekly repo auctions were launched in September 2015 with the objective to inject short-term liquidity in the system, following the requirements of the adopted CHF-loan conversion legislation. The interest of banks was high in the first months but then it slowly faded throughout 2016.