Jitters surrounding the fate of Latvia and its euro currency peg appear to have taken their first victim – the 50m lat sale of Latvian government Treasury bills on Wednesday. Here’s Reuters on the story:
RIGA, June 3 (Reuters) – The Latvian treasury failed on Wednesday to sell any of the 50 million Latvian lats ($100.7 million) of various treasury bills offered for sale on Wednesday, the stock exchange said.
The failure to attract offers for the paper came as the Latvian market remained frozen due to worries about the currency, which some fear faces a devaluation, and amid central bank buying of the lat to keep it within its peg to the euro.
The treasury, which carries out its auctions via the stock exchange, had offered 20 million lats of paper maturing in July, 10 million lats in September, 10 million lats due in December and 10 million lats maturing in June 2010.
The reaction in the forex markets has been pretty severe. Here’s what happened to the Swedish krona for example:
That’s presumably because Sweden’s banks are seen as particularly exposed to a Latvian devaluation. Although to be honest, the reaction across ERM2 prospective member countries like Poland and Hungary has been equally severe too:
Related links:
A Baltic quagmire, continued – FT Alphaville
Waiting for Latvia to devalue – FT Alphaville
Is Eastern Europe on the edge again? – FT Alphaville
