Hungarian central bank pumps extra liquidity into market as forint, stocks get trounced

By bne IntelliNews March 17, 2020

The Hungarian forint plunged to record lows against the euro on March 16 with a huge spike in the early afternoon to touch 348 after emergency measures were unveiled by the central bank. The EUR/HUF exchange rate later retreated to 343.

The Hungarian National Bank (MNB) requested a moratorium on repayments for on corporate loans to ease the pain of firms hit by the coronavirus. It also plans to expand the range of collateral. Domestic banks currently have outstanding corporate loan stock of HUF8.3 trillion (€24.4bn), including HUF3.6 trillion for large companies.

Analysts estimate that Hungarian banks could suffer a HUF150bn shortfall in interest income in the remaining part of the year, if the government backs the central bank's proposal.

In its weekly Fx swap tender the MNB pumped HUF150bn additional liquidity to the bank sector, which calmed the markets. The MNB allocated HUF101bn one-month, HUF76.2bn of three-month, HUF51bn of six-month and HUF26.2bn of twelve-month swaps against euros at the tender, bringing total stock to HUF2.14 trillion.

The MNB also announced that it will hold one-week swap tenders every day, instead of the weekly tenders to provide local banks with forint liquidity. Government bond yields jumped on Monday, with the yield on the 10-year bond rising 46bp to 3.26% and the five-year yield surging 37bp to 2.27%.

Prime Minister Viktor Orban on Monday announced in parliament the shutdown of Hungary's borders and the closure of all shops and restaurants except for groceries, food shops, and pharmacies. He said the coronavirus would lead to a rise in unemployment and fiscal and monetary tools would be needed to save Hungary from falling into recession.

Stocks on the Budapest bourse slid 5.5% 32,304 in tandem with global markets over fear of the spread of the coronavirus and its economic impacts. Stocks erased much of their Friday gain. OTP declined 7.27% to HUF10,200 on massive HUF16.75bn, turnover, more than half of the session total of HUF27.3bn.

Investors dumped MOL shares as the slide in oil prices continued. MOL ended the day at  HUF1,720, down 7%. Richter and Magyar Telekom lost 4.4-4.5% respectively.

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