DUBAI: Yields at a Qatari Treasury bill auction jumped yesterday to their highest level in at least a year, signalling unusually tight money market liquidity which traders attributed to geopolitical tensions.
The yield on 182-day T-bills surged to 1.36 percent, the highest level since the central bank started to publish auction results in October 2012, from 1.15 percent last month.
“During the height of the Syrian issue there were a few investors who sold equities and they needed to buy dollars to get out,” said a bank trader who declined to be named under briefing rules.
“Banks bought dollars from the central bank at the time and that took some liquidity away. That has not come back.”
The yield on 273-day notes shot up to a one-year high of 1.57 percent yesterday from 1.22 percent on September 3; 93-day bills were at 0.97 percent, the highest since March 2013 and up from 0.87 percent for 91-day bills sold in September.
The central bank has conducted monthly auctions of 91-, 182- and 273-day T-bills since 2011, draining QR4bn ($1.1bn) from the money market each time.
The demand of QR4bn at yesterday’s auction was the lowest in at least a year, data posted on the central bank’s website showed.
In early September, riyal/dollar forward contracts jumped to a three-year high because of fund outflows triggered by concern that a US military strike against Syria could embroil Gulf Arab states more deeply in the Syrian civil war. Although stock markets around the Gulf fell sharply, money markets in other countries were not affected nearly as much as Qatar’s.
The reasons for the difference are not completely clear, but Qatar has been particularly active in supporting Syrian rebels. Its money markets are smaller than those in Saudi Arabia and the United Arab Emirates, which may make them more vulnerable to swings.
Geopolitical jitters in the Gulf have eased since Syria accepted a Russian-US plan to remove its chemical weapons. Yesterday, one-year riyal forwards were quoted at around 100 points bid, up from Monday’s close of 85 bid but well below the three-year high of 180 hit in early September.
The latest level suggests a 0.3 percent weakening of the riyal from its peg of 3.64 to the dollar over a one-year period.
“It does not look like the tightness is going to go away immediately, but we had a day or two of the market being reasonably liquid,” the trader said.
Non-resident bank deposits in the world’s top liquefied natural gas exporter fell for a fourth month in a row to QR36.8bn in August, the lowest level since November 2012, the latest central bank data shows. That is still 24.8 percent up from a year ago.
Another sign of tight liquidity was the amount of excess funds banks placed at the central bank’s low-yielding overnight deposit facility. Funds parked there plunged to QR17bn in August, the lowest level since December 2011, from QR81.8bn in the previous month.
Reuters
