The Lebanese pound remained unchanged from last week's interbank trading, which stood at LP1,513.75-14.25. Activity was lackluster, with volume of $30-$40 million.
As with other financial markets, players are opting not to enter until the real outcome of the elections is known. Given that it may take up much of October for a new government to be formed, there may yet be several weeks of relative inactivity.
The local currency is already trading at the top-end of the Central Bank’s LP1,501-14 intervention band as concerns over the budget deficit have mounted. Clearly, players will be looking for a change in direction from a new government, that is, moves on certain issues to improve the fiscal position such as -the sale of cellular licenses, initiation of a privatization process, cutting-back on an overbearing public administration and introduction of VAT.
Nominal Treasury Bills (TB) subscriptions resumed their increase as they gained 45 percent at the August 17 auction, to LP461 billion ($305.8 million), while maturing bills rose 29 percent to LP321 billion ($212.9 million), thus resulting in a LP140 billion ($92.9 million) surplus.
Banks, the main players on the TB market, are adopting a wait-and-see attitude ahead of election time, decreasing their activity on the secondary market, where they used to sell 3-M and 6-M TBs, in order to purchase more 24-M TBs at the official auctions.
This was borne out on August 17 th , with the 24-M TB increasing its share of purchase subscriptions from 56.6 percent to 69.3 percent. A switch in fortunes between the 12-M and 6-M TBs saw the share of the former go down to 9.2 percent from 20.4 percent, while that of the latter increased to 18.4 percent from 10.7 percent. The 3-M TB accounted for 3.1 percent of subscriptions on a purchase level.
The Central Bank sold LP2 billion ($1.3 million) worth of 45-day certificates of deposit this week, as banks satisfied some of their short-term maturity requirements not covered by TBs. ― ( Banque du Liban et d'Outre-Mer Sal )
© 2000 Mena Report (www.menareport.com )