Banks Left Wanting At Auction

Russian banks on Monday sought more money than was on offer at an auction of unspent budget funds aimed at supporting liquidity in the industry after investors continued pulling money out of the country's markets last week.

Banks submitted bids for 90.2 billion rubles ($3.5 billion) at an auction where 60 billion rubles ($2.4 billion) was made available by the Finance Ministry, the ministry said in a statement. Banks borrowed at an average interest rate of 8.43 percent for five weeks.

The ministry will offer as much as 160 billion rubles of one-week loans Tuesday, the first time Russia has held two auctions in one week since starting the program in April.

Liquidity is tight after investors pulled out a net $4.6 billion in August following Russia's military incursion into Georgia. The Central Bank said Friday that it sold currency to prop up the ruble after withdrawals by investors sent the currency to its lowest level in almost a year.

"Liquidity is tight because of the outflow of capital on Thursday and Friday," said Yevgeny Nadorshin, an analyst at Trust Investment Bank. Demand was also high because banks had transferred money into their mandatory reserves with the Central Bank, he said.

On Friday, Central Bank First Deputy Chairman Alexei Ulyukayev said demand for funds would be high in October, as companies make value-added tax payments of about 300 billion rubles.

He said the country was "fully armed" to deal with this through its daily repurchase auctions, as well as the weekly sales of budget money and spare money from the state Housing Fund.

n The Central Bank said in a statement Monday that it sold $30.98 million more than it purchased in August and that it bought a net 614 million euros ($872 million) in the period.