БНБ



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DEBT MARKETS

1. MONEY MARKET

The interbank money market monthly volume marked a slight decrease in September 2006 and the deals totalled BGN 5834.6 million, the second largest amount (after August) since the beginning of the year. The decline from August comprises BGN 272.0 million, or 4.45 per cent. It comes from a reduction in the volume of the deposit lending part of term transactions, in total by 5.72 per cent, in unsecured lending by 4.84 per cent, and in secured lending by 96.57 per cent, and from a 30.82% decrease in the repo-transactions part. In outright transactions there is a 68.69% increase, both BGN denominated and foreign-currency (USD and EUR) denominated government securities are traded. With a high level of liquidity and an availability of large resources continuing in September, the decline in money market transactions volume is not very high; banks also remain active in Euromoney market dealing, but there is a decrease in the total monthly volume of term transactions (deposit and repo deals) in EUR, USD, etc., and in outright purchases.

The average daily excess reserves in September amounted to BGN 6617 thousand, decreasing from August’s figure (BGN 28427 thousand) by 76.15 per cent. In 18 calendar days (1st to 3rd, 6th, and from 12th to 25th, including holidays) of the month there was relative resource shortage (negative excess reserves): in the first days as a result of the minimum required reserves regulation for the new maintenance period and in the other days – of payments to the Ministry of Finance.

On the last day of September interbank activity followed the pattern established in the previous year and the beginning of 2006, and reached BGN 1085.1 million, the largest figure so far: more than 5 times the daily volume of transactions in the previous days of the month and BGN 90.8 million more than on 31st August.

Liquidity in the banking system has been influenced for years by monetary flows through government securities (bills and bonds of the Ministry of Finance), and in September there is a net outflow from banks of BGN 11.3 million as a decrease in resources. Pension transfers effected from 7th to 20th September amount to BGN 450 million as an increase in resources.

1.1. Interbank market: deposit lending and repo transactions

1.1.1. Cash market

Deposit lending maintains a prevailing share in the interbank money market volume, 99.23 per cent in September after 98.96 per cent in August. It is commercial banks’ main tool for managing current daily liquidity.

1.1.1.1.Unsecured market

Term deposit lending between market participants is mainly unsecured and in September it is BGN 5578.5 million, 99.20 per cent of the total amount of transactions, and 99.43 of this (BGN 5546.8 million) is overnight deals.

Commercial banks, via overnight transactions, provide additional resources at the beginning of every month for the regulation of required minimum reserves and in the middle of the month for clients’ payments.

The monthly average for the overnight interest rate is an annual 2.99% and is 0.05 percentage points higher than the BIR (base interest rate, effective from the first calendar day of each month and equal to the simple average of the LEONIA reference rate from the previous month), which for September is 2.94%.

Interest rates moved in September close to the euro area's EONIA, which reached a high of 3.10% (in 1 of 21 working days), versus 3.07% (in 9 of 23 working days) in August.

1.1.1.2.Secured market

Secured term resource lending transactions remain with a small share in the interbank market, down to 0.03 per cent for deposit lending (BGN 2.0 million) and down to 0.77 per cent for repo-deals (BGN 43.1 million) in September compared to 0.95 per cent and 1.04 per cent respectively in August.

1.1.2. Derivatives market

Not yet developed in the country.

1.2. Outright purchases of securities on the secondary market

On the interbank secondary market for government securities outright purchases marked a 68.69% increase compared to August. There were deals in BGN denominated issues shorter than 12M, 2.73 per cent (BGN 5.8 million) of the total amount, issues longer than 12M 94.35 per cent (BGN 199.1 million) of the total amount, and in foreign-currency (EUR and USD) denominated issues 2.92 per cent (BGN 6.1 million) - compared to 99.57 per cent for BGN denominated longer than 12M and 0.43 per cent for foreign-currency denominated in August.

2. CAPITAL MARKET

In September there were no corporate bond issues registered on the bond market of The Bulgarian Stock Exchange – Sofia (BSE-Sofia).

As a result of a smaller official market turnover, the monthly stock-exchange turnover of municipal and corporate bonds was slightly lower than in August and amounted to BGN 40.4 million (a daily average of BGN 2.1 million) including repo-operations for BGN 5.4 million. The trade in IBild – AD bonds took the main share in the monthly trading with 6500 bonds for almost BGN 13 million.

On the world markets the price of EUR-denominated 2007 Bulgarian Eurobonds got slightly under the 102% mark, of EUR-denominated 2013 globals – kept the 118% mark, and of USD-denominated 2015 globals rose to 118%.

On the secondary market the price of the compensation instruments was about BGN 0.67 per item, though in mid-September it reached 0.70 per item for a couple of days. The compensation instruments market turnover amounted to BGN 65.7 million (a daily average of BGN 3.5 million), compared to 10.6 million in August.

ASSET MARKETS

NET ASSETS:

equity

GROSS ASSETS:

real estate

commodities

forex

1. EQUITY CAPITAL (NET ASSETS)

The Bulgarian Stock Exchange – Sofia (BSE-Sofia) monthly turnover in shares doubled its value compared to August and amounted to BGN 209.4 million (a daily average of BGN 11 million), including block deals (and deals registered via authorised intermediaries) for BGN 14.9 million and repo-transactions for BGN 7.9 million.

Major deals in ordinary trading were concluded mainly for shares in BTC AD, some 13 million shares for about BGN 136 million, and also in CCB AD, BACB AD, Euro Ins AD and others.

On 29th September both stock exchange indices, SOFIX and BG40, reached new historical highs of 966.78 and 181.79 points respectively.

The price trend of the Bulgarian market was similar to the trend of the leading foreign markets.

Placements of rights on shares at the amount of BGN 1.5 million were effected on the IPO market of the BSE-Sofia in September.

2. FOREIGN EXCHANGE MARKET

In September the USD/BGN exchange rate ranged from 1.52181 (4th September), to 1.54562 (19th September).

In September the total turnover of the foreign exchange market reached EUR 6967.1 million. The average daily turnover was EUR 366.7 million. The interbank turnover (without BNB) in euro terms was EUR 58.6 million. The USD trade between commercial banks was USD 31.3 million and comprised 42.1 per cent of the interbank foreign exchange trading (without BNB).

On the interbank market, the BNB purchased EUR 1213.8 million and sold EUR 1069.1 million. The amount of foreign exchange that the BNB sold to budgetary organisations (equal to EUR 19.0 million) exceeded BNB purchases (equal to EUR 11.2 million) by EUR 7.8 million.

The trade between commercial banks and customers amounted to EUR 2 252.2 million, and the amount of foreign exchange that commercial banks bought (equal to EUR 1 138.5 million) exceeded their sales (equal to EUR 1 113.7 million) by EUR 24.8 million. Within this turnover, the commercial banks bought foreign exchange from foreign entities equal to EUR 36.0 million and sold to such entities foreign exchange equal to EUR 8.3 million. As a result of an increase in foreign exchange supply by power sector companies on 14th September, there was a substantial daily growth of foreign exchange bought by the commercial banks from customers.

Non-bank financial intermediaries, licensed by the BNB for foreign exchange trading, purchased foreign exchange equal to EUR 89.9 million and sold foreign currencies equal to EUR 90.3 million.

TENDENCIES

Short-term expectations:

- with high liquidity in the banking system, the market to keep its usual volume, interbank interest rates to increase in line with the euro area policy rate (3.25% from 11th October);

- the SOFIX to overcome the psychological barrier of 1000 points;

- USD/BGN to move within 1.50-1.55.

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MARKET REVIEW SEPTEMBER 2006 No 11 / 2006

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size of the undervaluation of the BGN vis-à-vis the purchasing power parity

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-

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New tops peaks in the stock-exchange indices

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A slight decrease in monthly turnover …

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middle of SOFIBID and SOFIBOR

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size of the undervaluation of the BGN vis-à-vis the purchasing power parity

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Boris Malinchev

(+359 2) 9145 1704

Vladimir Tsonchev

(+359 2) 9145 1907

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A surge in compensatories trading in the middle of the month

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Lubomir Tonev

(+359 2) 9145 1608

Daniel Yankov

(+359 2) 9145 1610

1.

Ivanka Ivancheva

(+359 2) 9145 1712

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indices based on the purchasing power parity calculated via only 1 commodity: the BIG MAC

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BSE indices marked new historical highs for a second month in a row

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The yyield at issuance on 3M government securities for BGN 15 million at the auction held on 11.09.2006 is

3.07%

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Boris Malinchev

(+359 2) 9145 1704

Vladimir Tsonchev

(+359 2) 9145 1907

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A historic end-of-month peak on the interbank market

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(the index is quarterly)

In September the monthly average of the LEONIA, a reference rate based on unsecured overnight deposit lending by 14 banks, rose to 2.98%. Hence the size of the BNB base interest rate for October is 2.98%.

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. . . and a record daily high of more than BGN 1 billion on 29th September

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BTC AD shares for over BGN 108 million were traded on 29th September.

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