Qatar money market still liquid despite Syria
Doha, September 13, 2013
Qatar's central bank will continue draining the same amount from the money market through monthly Treasury bill auctions despite a recent drop in demand for them, its governor said.
Geopolitical tensions over Syria and the possibility of a US military strike against Damascus have caused onshore liquidity in Qatar to tighten in the last several weeks, and the last two T-bill offers were barely subscribed.
But asked by reporters on Tuesday whether the central bank would keep draining 4 billion riyals ($1.1 billion) a month, Sheikh Abdullah bin Saud al-Thani said: "It is maintaining."
Last week's auction drew bids of just 4.5 billion riyals, roughly half of demand seen at auctions earlier this year. The yield on 182-day T-bills came in at 1.15 per cent, the highest level since October 2012; the yield on 91-day bills rose to a four-month high of 0.87 per cent.
The central bank has conducted monthly auctions of 91-, 182- and 273-day T-bills since 2011, consistently draining the same amount. In April this year, Sheikh Abdullah told Reuters that the central bank would if needed flexibly adjust the amounts of riyal bonds and T-bills which it offered.
Sheikh Abdullah also said on Tuesday that the day's auction of riyal government bonds had been fully subscribed.
"I just got a message to say it is oversubscribed, which is good news that liquidity is still going on," he said on the sidelines of a banking conference in Qatar's capital, without giving details.
The central bank offered a total 4 billion riyals in three- and five-year local currency government bonds and sukuk on Tuesday in a quarterly issue which it allocates directly to banks.
One-year Qatari riyal currency forwards, which have been pushed up by the Syrian crisis, continued to climb on Tuesday, reaching 180.01 points bid, the highest level since March 2010. They closed at 160 bid on Monday.
The rise implied a 0.5 per cent weakening of the riyal from its peg of 3.64 to the U.S. dollar over a one-year period.
Traders said the forwards had been rising over the past few weeks as some foreign investors reduced their exposure to the Gulf region because of Syria; this tightened liquidity in Qatar's small money market.-Reuters