ZAGREB: Croatia sold less than a third of T-bills on offer in an auction on Tuesday with concerns over the government's planned conversion of Swiss franc loans cited as one reason.
Finance ministry data showed it sold 187 million kuna ($27.62 million) worth of bills against the 600 million kuna target. Some 1.2 billion kuna worth of bills mature later this week.
"The kuna liquidity has tightened somewhat recently, but more importantly the banks are cautious before details of the government's decision on conversion of the loans in Swiss francs," a dealer at a major local bank said.
The banks will need to balance their currency positions after the conversion which now prompts them to set aside funds while awaiting the government's decision expected later this week. The banks' portfolio of loans in Swiss francs is worth some 25 billion kuna.
There are some 60,000 local holders of Swiss franc loans severely hit by a surge in Swiss franc value in recent years .
The euro-denominated bills were not offered for the Treasury bills auction in a row.
Croatia's total Treasury bill debt amounts to 19.2 billion kuna in local currency and 90.7 million euros.
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