The mild easing of tensions in the money and foreign exchange markets has been significantly contributed to by the central bank’s readiness to meet all banks’ liquidity needs at this week’s reverse repo auction.
Thus, following this week’s auction, a slight decline in overnight yields was recorded, which fell to levels below 5% in the second half of the week. However, in the money market, interest rates on longer-term loans continue to show a predominantly upward trend, indicating that uncertainty regarding future moves by the HNB remains present in the market. At the last reverse repo auction on Wednesday, banks expressed demand amounting to 2.54 billion kuna, which represents a noticeable decrease compared to the previous week, which was somewhat expected given the entry into the second half of the current reserve maintenance period. The central bank accepted all incoming bids; however, on a weekly basis, we are recording a decrease in liquidity levels by about 150 million kuna through open market operations.
For the second consecutive week, we recorded an increase in the marginal repo rate to a level of 4.90%. In the current market situation, we expectedly recorded weak investor interest at the last treasury bill auction, although it had not been held for two weeks. Thus, instead of the planned 350 million kuna, only 183 million kuna was subscribed, along with a further increase in one-year yields. The lack of investor interest positively affected the improvement of the system’s liquidity level, given that the state’s short-term debt was reduced by 162 million kuna on a weekly basis. At the same time, as we approach the end of the central tourist season, we are witnessing a return of cash into circulation, which positively reflects on the liquidity level. According to the HNB, the average surplus during the first half of this week approached a level of 1.3 billion kuna. At the end of the week, a noticeable decline in demand and interest rates in the money market was observed.
