> The domestic money market showed a slight increase in

the deposit lending activity and volumes in September;

interest rates slightly decreased.

> The euro with a two-year low against the dollar in

September.

> Decline of the main index of the BSE-Sofia SOFIX in

September.

SEPTEMBER 2014 No 11 / 2014

1

DEBT MARKET

Middle of Sofibid and Sofibor

2

1. MONEY MARKET

In September the interbank money market volume was with

an increase compared to August, which is illustrated by the

increased volumes of the repo-deals. The average daily

volume of interbank money market substantially increased.

The trade remained focused mainly in the overnight

maturity; the interest rate decreased during the second half

Georgy Tsvetkov

(+359 2) 9145 1611

3

of the month, which did not affect the average numbers

significantly.

The overall volume of the domestic money market increased

by 2.3 per cent to BGN 3472.0 million. The deposit lending

deals volume went down by 3.6 per cent to BGN 2072.2

million, while the repo-deals volume increased by 12.7 per

cent, to BGN 1399.8 million.

The monthly volume of the euromoney market term

transactions decreased by 12.5 per cent and reached BGN

4740.3 million. The deposit lending deals (in all currencies:

EUR, USD and GBP) are with a decrease of 13.2 per cent, to

BGN 4668.8 million, seen mainly as a decrease in the USD

and EURO-denominated deposits. The repo-deals showed a

significant increase in volumes by 79.1 per cent, to BGN 71.5

million (39.9 million in August).

A decrease in the BGN

deposit lending

volume…

… in combination with a

decrease in the

euromoney market.

Interbank Euromoney Market, volumes (BGN equivalent in mln)

0500

100015002000250030003500400045005000

EUR EUR EUR USD USD USD Other Other Other

July 2014 August2014

September2014

July 2014 August2014

September2014

July 2014 August2014

September2014

deposit deals repo deals

4

The banking system remains highly liquid. The average daily

excess reserves in September increased by 122.95 per cent

and reached BGN 1151.7 million, following BGN 516.6 million

in August (excess reserves are calculated taking into account

a calendar month, and not the actual maintenance period –

from the 4th working day of each month till the 3rd working

day of the next). There was not a single day in August with

“negative” excess reserves for the system.

Interbank money market and excess reserves, September 2014 (BGN mln)

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

01.09

02.09

03.09

04.09

05.09

08.09

09.09

10.09

11.09

12.09

15.09

16.09

17.09

18.09

19.09

23.09

24.09

25.09

26.09

29.09

30.09

excess reserves money market

Liquidity in the banking system is also influenced every

month by: (1) monetary flows through government securities

- bills and bonds of the Ministry of Finance, which in

September resulted in a net outflow from banks of BGN

105.7 million; and (2) pension transfers, which in September

led to an increase in system resources by BGN 786.4 million.

The liquidity in the

banking system

increased

5

Deposit Deals, September 2014 (BGN mln)

0

50

100

150

200

250

01.09

02.09

03.09

04.09

05.09

08.09

09.09

10.09

11.09

12.09

15.09

16.09

17.09

18.09

19.09

23.09

24.09

25.09

26.09

29.09

30.09

all deposit deals unsecured of which overnight secured

1.1. Interbank market: deposit lending and repo-

transactions

Deposit lending maintained a prevailing share in the

interbank money market volume (deposit lending and repo-

deals); for September this share slightly decreased and

reached 59.7 per cent, after 63.4 per cent in August;

respectively, repo-deals came up to 40.3 per cent compared

to 36.6 per cent in August.

Unsecured market

In September term unsecured deposit lending between

market participants amounted to BGN 2072.2 million and

81.6 per cent of these (BGN 1691.0 million) were overnight

deals. This share inched lower compared to August, when

89.1 per cent (BGN 1916.0 million) of the deals were

overnight.

6

Maturity breakdown of the unsecured interbank trades

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sep'13 Nov'13 Jan'14 Mar'14 May'14 Jul'14 Sep'14

ON up to 1W above 1W up to 1M above 1M up to 3M above 3M

`

Unsecured Deposit Market, September 2014 (BGN mln)

0

50

100

150

200

250

01.0902.09

03.0904.09

05.0908.09

09.0910.09

11.0912.09

15.0916.09

17.0918.09

19.0923.09

24.0925.09

26.0929.09

30.09

overnight other

Overnight Market Rates, September 2014

0.00

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

01.09

02.09

03.09

04.09

05.09

08.09

09.09

10.09

11.09

12.09

15.09

16.09

17.09

18.09

19.09

23.09

24.09

25.09

26.09

29.09

30.09

Effective overnight rate - unsecured deposit deals SOFIBID ON SOFIBOR ON

7

The monthly average interest rate of the overnight

unsecured deposit lending in September decreased, reaching

the level of 0.03%.

The monthly average of the LEONIA, a reference rate based

on the unsecured overnight deposit lending by a panel of

banks also decreased and amounted to 0.03%. Hence the

size of the BNB base interest rate for October 2014 was set

at 0.03%.

The money market yield curve increased throughout

maturities higher than 2 weeks.

LEONIA / EONIA, September 2014

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

01.09

02.09

03.09

04.09

05.09

08.09

09.09

10.09

11.09

12.09

15.09

16.09

17.09

18.09

19.09

22.09

23.09

24.09

25.09

26.09

29.09

30.09

LEONIA EONIA

The money market yield curve

reflects theaverage value of

SOFIBIDand SOFIBOR

0.00

0.50

1.00

1.50

2.00

2.50

ON

SW 2W 3W 1M 2M 3M 4M 5M 6M 7M 8M 9M 10M

11M

12M

30.09.2014

29.08.2014

8

Secured market

There were no secured deposit lending deals in September,

while the repo-deals share was 40.3 per cent of the total

interbank money market transactions volume (BGN 1399.8

million); this share increased compared to August, when it

amounted to 36.6 per cent (BGN 1242.4 million).

MARKETS:

value in millions of BGN

equivalent in millions of EUR

value in millions of EUR

equivalent in millions of BGN

value in millions of USD

equivalent in millions of BGN

equivalent in millions of EUR

equivalent in millions of BGN

equivalent in millions of EUR

TYPES OF DEALS:

unsecured deposit deals 2072.2 1059.5 643.8 1259.2 2242.8 3479.4 1779.0 3.9 2.0

secured deposit deals - - - - - - - - -

repo of Bulgarian govt securities* 1399.8 715.7 32.6 63.8 - - - - -

outright purchases of short-term BGN Bulgarian govt securities 150.5 76.9 - - - - - - -

outright purchases of long-term** BGN Bulgarian govt securities* 112.0 57.3 - - - - - - -

outright purchases of long-term** forex Bulgarian govt securities* - - 58.1 113.6 - - - - -

* at market value; for repos - only the security purchase (money lending) leg** bonds of over 1 year in original maturity

Source: BNB, from commercial banks' daily reports

BULGARIAN INTERBANK MONEY MONEY MARKET AND EUROMONEY MARKET DEALS BETWEEN BULGARIAN BANKS, SEPTEMBER 2014 (in millions of the respective currencies)

interbank money market euromoney market deals between Bulgarian banks

deals in BGN deals in EUR deals in USD deals in other currencies

1.2. Outright interbank purchases of securities on the

secondary market

On the interbank secondary market for government

securities, the market value of the outright purchases of all

maturities in September reached BGN 262.1 million (increase

of 232.5% compared to BGN 78.8 million in August).

Outright deals in Bulgarian government securities, September 2014 (BGN mln)

0

5

10

15

20

25

30

35

01.09

02.09

03.09

04.09

05.09

08.09

09.09

10.09

11.09

12.09

15.09

16.09

17.09

18.09

19.09

23.09

24.09

25.09

26.09

29.09

30.09

BGN-denominated securities up to 12M BGN-denominated securities over 12Mforex-denominated securities

On the euromoney market in September the volume of

outright purchases of government securities increased and

reached BGN 113.6 million, after BGN 99.0 million in August.

9

2. CAPITAL MARKET

The following primary auctions of government securities were

carried out by the Bulgarian National Bank as an agent of the

Ministry of Finance in September:

- on 8 September for a new issue BG3010414004 (12M

government bills) with maturity date 10 September 2015, at

BGN 300 million. For participation in the auction were

admitted orders to the amount of BGN 693 968 800. The

Ministry of Finance approved bids for BGN 300 million;

- on 23 September for a batch of an issue BG2040114212

(7Y government securities) with maturity date 12 February

2021, at EUR 35 million and interest rate 3.00%; for

participation in the auction were admitted orders at EUR 93

790 000; the Ministry of Finance approved bids for EUR 35

million;

- on 15 September for a batch of an issue BG2040014214

(10Y6M government securities) with maturity date 15

February 2024, at BGN 60 million and interest rate 4.00%;

for participation in the auction were admitted orders at BGN

115 750 000; the Ministry of Finance approved bids for BGN

60 million.

The monthly secondary market stock-exchange turnover of

corporate bonds made a multifold decrease in September,

amounting to BGN 8.5 million (a daily average of BGN 0.4

million) after BGN 31.2 million in August. More significant

was the turnover with the bonds of TZ-IME AD (BGN 6.4

million). The deals concluded out-of-stock exchange were at

the amount of BGN 2.0 million.

Boris Malinchev

(+359 2) 9145 1704

10

0

2

4

6

8

10

12

14

16

18

20

BSE transactions with bonds, September 2014 (date T; BGN mln)

Bonds Segment Bonds / OTC

The price of new EUR-denominated global bonds with

maturity 2024 kept staying at the level of over 100%, and

prices of EUR-denominated 2017 globals went down to the

106% mark. The USD-denominated 2015 globals prices

remained at the 102% mark.

On the secondary market the prices of the compensation

instruments had no significant changes during the month.

They started from the level of BGN 0.59 per item at the

beginning of the month, BGN 0.62 in mid-month and BGN

0.60 at its end. The compensation instruments segment

doubled, amounting to BGN 1.2 million (a daily average of

BGN 0.06 million) compared with the BGN 0.6 million in

August.

0

500

1000

1500

2000BSE transactions w ith compensatories, September 2014

(date T; BGN thousand)

Compens.instruments Segment compens.instruments / OTC

11

GROSS ASSETS:

real estate

(National Statistical Institute – quarterly

data)

NET ASSETS:

equity

commodities

forex

ASSET MARKETS

250

300

350

400

450

500

550

600

650

75

95

115

135

155

175

195

215

235

BGBX40 and SOFIX

BGBX40 SOFIX (right scale)

1400

1600

1800

2000

2200

2400

2600

2800

02.01 02.02 02.03 02.04 02.05 02.06 02.07 02.08 02.09

Gold (XAU/BGN)

1.20

1.25

1.30

1.35

1.40

1.45

1.50

1.55

1.60

1.65

1.70

02.01 02.02 02.03 02.04 02.05 02.06 02.07 02.08 02.09

FOREX (USD/BGN)

830

840

850

860

870

880

890

900

02.01 02.02 02.03 02.04 02.05 02.06 02.07 02.08 02.09

Real Estate Prices (BGN per sq. m.)

12

EQUITY CAPITAL (NET ASSETS)

municipal bonds

corporate bonds

UCIT Structural products

of public companies

of non-public

companieBSE deals 6.1 18.8 2.6 0 8.5 1.2 0 0.0 0.0 0.1 0.0 0 0of which:

regular deals 6.1 18.8 2.6 0 8.5 1.2 0 0.0 0.0 0.1 0.0 - -

priv atis. segment deals (cash) 0 0 - - - - - - 0 0

Priv atis. Segm. (compensativ e)* 0 0 - - - - - - - 0 - 0 0

Initial Public Of f ering Segment* 0 0 - 0 0 - - 0 - 0 - - -

OTC deals (purchases and sales, repo, tender purchases, redemption, registration etc.)** 9.7 16.5 2.6 0 2.0 0 0 0 0.0 1.7 6.7 - -

Source: BSE-Sof ia daily reports

* Not included in the abov e totals

** reported through BSE trading platf orm*** The Exchange Traded Products Segment was created in May 2014; it replaced the f ormer UCIT's Segment and Structured Products Segment

DEALING IN SECURITIES REGISTERED ON THE BSE-SOFIA : STOCK-EXCHANGE AND OTC TURNOVER (in millions of BGN) SEPTEMBER 2014

Trade in equities not registered on the BSE-

SofiaEquities Segment

Standard Equities Segment

Special Purpose Vehicles Segment

Exchange Traded Products Segment***

MARKETS ALTERNATIVE MARKET Bonds Segment

MAIN MARKETPremium Equities Segment

Subscription Rights

Segment

Special Purpose Vehicles Segment

Compensation

Instruments Segment

The Bulgarian Stock Exchange – Sofia (BSE-Sofia) monthly

turnover in September increased by more than 5%,

amounting to BGN 27.6 million (a daily average of BGN 1.3

million) after BGN 26.2 million in August. A more significant

turnover during the regular trade was reached by the

equities of Speedy AD (BGN 14 million) and Sopharma AD.

T

The turnover in deals concluded off-stock-exchange

(reported through the stock-exchange platform) was BGN

37.2 million. A more significant volume was achieved by the

Boris Malinchev (+359 2) 9145 1704

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1

2

3

4

5

6

7

8

9

10

BSE transactions with shares, September 2014 (date T; BGN mln)Premium Equities

Standard Equities

SPV

privatis.(BGN)

AltM/Equities

AltM/SPV

13

deals in equities of Enemona AD, Sintetika AD and Velgraf

Asset Management AD.

T

The main equity prices index of the Bulgarian stock market

SOFIX showed a relatively stable behaviour in September,

ending the month with decline of 1,3%. In general the index

showed a more clearly expressed downward movement than

the leading European economy index (Germany) DAX which

finished the month with a minimal 0.05% decline, while the

Rumanian BET ended the month with a 2.5% increase.

0

1

2

3

4

5

6

7

8

9

10

OTC transaktions with equity reported on the BSE-Sofa AD September 2014 . (BGN mln)

Premium/OTC

Standard/OTC

SPV/OTC

AltM/Equities/OTCAltM/SPV/OTC

300350400450500550600650700750800

4000

5000

6000

7000

8000

9000

10000

11000

DAX, SOFIX and BET, September 2014

DAX BET SOFIX (right scale)

14

80

90

100

110

120

130

140

80.00

100.00

120.00

140.00

01.08 06.08 11.08 14.08 19.08 22.08 27.08

BG40 and the equity price index s of Bulgarian banks, listed on the BSE - Sofia, August 2014

BGBX40

BANKS BSE(rightscale)

125

175

225

275

325

375

425

475

525

20

30

40

50

60

70

80

90

100

110

120

1.2 2.2 3.2 4.2 5.2 6.2 7.2 8.2

Prices of the bank shares in Bulgaria, eurozone and emerging markets, January - August 2014

BANKSBSE

BANKSEMU

BANKSEM

15

The index of the equity prices of the banks listed on the BSE-

Sofia showed stable movement during the month, slower

than the upward movement of the eurozone banks and

emerging countries banks indices.

There were no purchases on the Initial Public Offering

segment of the BSE-Sofia in September.

3. FOREIGN EXCHANGE MARKET

The euro reached a two-years low against the dollar in

September, due to less risk appetite because of ongoing

tensions between Russia and Ukraine and the imposition of

new sanctions against Russia. On its regular monthly

meeting, the ECB took a surprising decision, to cut the main

refinancing rate to 0.05% and the interest on overnight

deposits to a level of -0.2%. Additional pressure on the

single currency had poor economic data from the eurozone,

according to which the eurozone banks had shown little

interest in low-interest loans to the ECB and economic

growth was threatened by geopolitical conflicts that influence

corporate decisions. The negative data were seen as a sure

signal to the ECB to start implementation of quantitative

easing to stimulate the economy. The growth of the dollar

was also supported by positive news from the United States,

where the number of newly built homes the previous month

Lubomir Tonev

(+359 2) 9145 1608 Pavlina Babunova (+359 2) 9145 1907

0102030405060708090

100

BSE - Initial Public Offering Segment, August 2014 (date T; BGN thousand)

shares rights/shares bonds

16

exceeded expectations, reaching a six-year high, stoking

speculation about a recent increase in interest rates by the

Fed.

In September the lev markedly decreased against the dollar.

The increase of the greenback that started from the middle

of the previous month continued throughout September,

there was some stabilisation in the BGN-dollar ratio in the

second ten days of the month. The minimum value of

1.48721 BGN the dollar was registered on 03.09, and the lev

was the lowest against the dollar on the last day of

September, 1.55434 BGN. The average official exchange rate

of the dollar against the lev in September was 1.51585 BGN,

almost 0.05 lev higher than the average rate for the previous

month.

1.48

1.49

1.50

1.51

1.52

1.53

1.54

1.55

1.56

Daily BNB reference exchange rate for the USD,September 2014 (BGN per USD 1)

1.40

1.42

1.44

1.46

1.48

1.50

1.52

1.54

1.56

1.58

1.60

0

5

10

15

20

25

30

35

40

45

USD

mln

BGN per USD 1

Daily USD turnover and exchange rates of banks, September 2014 SPOT

traded between banks bought from customerssold to customers average rate for purchases from customersaverage rate for sales to customers average interbank rate

17

The total turnover of the forex market (gross sum of all

purchases and sales by reporting entities) in September

increased, compared to the previous month and reached EUR

18 790,7 million, about EUR 2 181,3 million higher than the

exchanged currency for the previous month. The average

daily turnover in September reached EUR 894,8 million and

also increased compared to the average daily turnover for

August, by EUR 104 million, with the same number of

1.91182

1.95583

1.99984

EUR SPOT exchange rate, September 2014 (BGN per EUR 1)

BNB interbank banks from customers banks to customers

0

50

100

150

200

250Daily EUR turnover of banks, September 2014 (EUR mln) SPOT

traded between banks bought from customers sold to customers

18

working days. The increase in turnover was realised in the

three main segments of the market - trade between banks

and BNB, the trade between banks with their customers and

interbank trading (without the participation of the central

bank).

The turnover between the BNB and the banks in September

reached EUR 6 924,7 million. Compared to the previous

month the increase was by about EUR 976,0 million. Тhe

central bank was a net seller of foreign currency to the banks

with a negative balance of EUR 84,3 million for the month.

BNB was a net buyer of foreign exchange by non-cash

transactions with budget organisations with a balance of EUR

161,0 million. In transactions at the counter with citizens and

budgetary organisations, the BNB was a net seller of foreign

currency for that month, with a negative balance of EUR 4,8

million.

19

163.8

159.1

153.1

207.3

167.9

140.3

152.9

188.0

192.8

547.9

301.4

202.5

218.1

September-13

October-13

November-13

December-13

January-14

February-14

March-14

April-14

May-14

June-14

July-14

August-14

September-14

Foreign exchange trading between banks, September 2013 to September 2014 (in mln of EUR) SPOT

The interbank spot trading without the participation of the

BNB in September reached EUR 218,1 million, the increase

by comparison with the previous month was almost

unnoticeable only about EUR 16 million.

The trade between banks and their customers in September

reached EUR 4 270,1 million. By comparison with the

previous month the increase in turnover was EUR 125,3

million. The banks sold more foreign currency to their

customers than they bought from them, by EUR 170,9

million.

-450

-350

-250

-150

-50

50

150

250

350

450

Foreign exchange trading of banks with customers - total, September 2014 (in mln of EUR) SPOT

bought from customers sold to customers net

20

The financial institutions registered in the central bank under

Art. 3, Para 2 of the Law on Credit Institutions and reporting

daily to the BNB foreign currency trading against levs in the

country decreased their turnover in September, compared to

the previous month. They bought foreign currency at the

amount of EUR 101,1 million and sold foreign currency equal

to EUR 108,8 million.

Foreign exchange market September 2014 SPOT

(in mln of EUR) Purchases Sales Balance Interbank market (commercial banks) 218.1 218.1 0.0 (Commercial) banks with customers 2049.6 2220.5 -170.9 - of which: with nonresidents 103.0 164.6 -61.6 BNB total 3613.5 3541.6 72.0 BNB with banks 3420.2 3504.5 -84.3 of which: *with banks - SPOT 446.0 3129.5 -2683.5 *with banks - TOM 51.0 0.0 51.0 *with banks - TODAY 2923.2 375.0 2548.2 *with banks - NOTES 0.0 0.0 0.0 BNB transactions with budgetary organisations

193.3 32.2 161.0

BNB notes operations at counters 0.0 4.8 -4.8

Source: BNB, from banks’ and BNB’s daily reports

21

0%10%20%30%40%50%60%70%80%90%

100%

1 2 3

1-interbank (without BNB); 2-banks with customers; 3-forex trading of financial institutions

Currency structure of forex trading for some participants, September 2014

OthersUSDEUR

Forex swaps and forwards in EUR terms (estimate)

FX swap and forward transactions - banks with final customers

(in mln of EUR)

Purchases Sales Balance September 2014 5617.0 5626.2 -9.2 - of which: with nonresidents 5542.8 5552.6 -9.8 FX structure (percentage) EUR 98.0 98.0 USD 2.0 2.0 Interbank FX swap and forward transactions (in mln of

EUR) Purchases Sales Balance September 2014 87.4 87.4 0.0 FX structure (percentage) EUR 68.6 68.6 USD 31.4 31.4

The figures for foreign exchange swap deals include both the sales of foreign currecies for BGN and the subsequent purchase operations. Source: BNB, from banks’ daily reports

22

TENDENCIES

Short-term expectations:

– the interbank money market to keep the record low

interest rate levels, at the background of slightly decreasing

volumes;

– the SOFIX to continue to move within the range of 510 –

520 points;

– USD/BGN to move within BGN 1.53 – 1.56.

23