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%, the highest level since the Qatar Central Bank started to publish auction results in October 2012, from 1.15% 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% yesterday from 1.22% on September 3; 93-day bills were at 0.97%, the highest since March 2013 and up from 0.87% 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 4bn riyals ($1.1bn) from the money market each time.
The demand of 4bn riyals 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 over a US military strike against Syria.
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% 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 36.8bn riyals in August, the lowest level since November 2012, the latest central bank data shows. That is still 24.8% 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 17.0bn riyals in August, the lowest level since December 2011, from 81.8bn riyals in the previous month.