The NBR has injected 8.4 billion lei in the interbank market

• Sources claim the NBR is preparing a benchmark bonds issue

The central bank yesterday injected 8.4 billion lei (1.99 billion Euros) in the interbank market, through a repo operation with a September 3rd maturity, at an interest rate equal to the NBR"s policy rate (8.5% a year), in an operation which some dealers say is the largest in history, according to dealers.

This is the first short term repo operation performed by the Central Bank, after its Board announced in the beginning of this month that it would reduce the maturity of repo operations from one month to one week.

Analyst Daniel Ionescu considers that "the amount is so large because the maturity for the repo operation performed on July 29, met with the banks" need for cash to continue their purchases of state bonds".

The main effect will be that the market will have liquidity that is not matched by the economy, according to Daniel Ionescu. "There will most likely be an auction held by the Ministry of Finance which will try to sell over 2 billion lei in government bonds or else risk payment default", Mr. Ionescu said.

Besides, market sources claim that a benchmark bonds issue will be launched today.

The capital injection was expected by the banks, according to dealers, as it has been almost a month since the NBR did a similar operation, as the market had reasonable liquidity levels.

The need for liquidity that the banking system has been displaying these past few days can be attributed to payments becoming due on August 24th, according to Marian Munteanu, trader with RBS Romania.

In July, the Central Bank continued to inject liquidity in the market through repo operations, with an average daily volume of 697.7 million lei, after the daily average volume for June was 748.4 million lei.

Today August 28th, is the maturity of the July 29th repo operation, by which the NBR injected 5.5 billion lei in the market.

On Thursday the average interest rate for overnight deposits (ROBID) was 9.99% p.a, up from 9.06% p.a in the previous session, whereas the average interest rate for loans on the interbank market (ROBOR) climbed up to 10.49% p.a. year, up from Wednesday"s 9.56% p.a.

Repo operations consist of NBR providing liquidity to the banks while buying government bonds.