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.
Money Market:
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)
