Substantial Rise In

Substantial rise in:

-forex market turnover between commercial banks and the BNB

-forex market turnover between commercial banks

-money market turnover between commercial banks

DEBT MARKETS

1. MONEY MARKET

In October2007 the interbank money market monthly volume grew and the deals totalledBGN 5831.6 million, marking an increase of BGN 1324.9 million, or 29.3 per cent above the volume in September.The increasecamefroma growth in the volume of unsecured deposit lending deals by30.4 per cent (there were only unsecured depo deals in October) while in repo deals there was a slight decrease of 0.9 per cent. The total volume of outright transactions this month marked a twofold increase as a result of sevenfold growth in EURdenominatedgovernment securities trading, and 67.9 per cent increase in BGN denominated government securities trading.

In October banks remained active in Euromoney market dealing, and the total monthly volume of term transactions increased: in deposit transactions denominated in all currencies by 19.1 per cent and in repo deals by 69.9 per cent. The outright purchases in this part of the market marked some 10 times increase.

The average daily excess reserves in October amounted to BGN13877thousand, 10.2 per cent lower than the September figure (BGN 15453 thousand). In16calendar days in total (from 1st to 3rd, from 12th to 15th, from 18th to 22nd and from 25th to 28th October, including holidays) of the month there was relative resource shortage (negative excess reserves), at the middle of the monthmainly as a result of payments to the Ministry of Finance.

Inthelastdayof Octoberinterbankactivityfollowedthepatternestablishedintheprevioustwo years, andthe volume of transactions amounted toBGN523.3million, 2 to 3times larger than the daily volumes of transactions in the previous working days of the month, but BGN34.4 million less than on 28th September 2007.

Liquidity in the banking system is influenced every month by monetary flows through government securities (bills and bonds of the Ministry of Finance), and in October there was a net outflow from banks of BGN 19.3 million as a decrease in resources. Pension transfers amounted to BGN 500.0 million as an increase in resources, BGN 40.0 million larger than the pension transfers volume in September.

1.1.Interbank market: deposit lending and repo transactions

1.1.1.Cashmarket

Depositlendingmaintainsaprevailingshareintheinterbankmoneymarketvolume, 93.7 per cent of the transactions in October after92.9 per cent in September 2007. It is commercial banks’ main tool for managing current daily liquidity.

1.1.1.1.Unsecured market

InOctober termdepositlendingbetweenmarketparticipantswas only unsecured and amounted toBGN5466.8million, and91.9 per cent of this (BGN 5022.8million) were overnight deals.

Commercialbanks, viaovernighttransactions, provideadditionalresourcesatthebeginningofeverymonthfortheregulationofrequiredminimumreservesandinthemiddleofthemonth for clients’ payments.

The monthly average for the overnight interest rate is an annual4.21%, 0.03 percentage points lower than the BIR (base interest rate, effective from the first calendar day of each month and equal to the simple average of the LEONIA reference rate values from the previous month), 4.24% in October.

1.1.1.2.Secured market

There were no secured deposit lending deals in October. The repo deals’share decreased to 4.6 per cent of the total transactions volume (BGN 268.6 million), compared to 6.0 per cent in September.

1.1.2.Derivatives market

Not yet developed in the country.

1.2.Outright purchases of securities on the secondary market

Ontheinterbanksecondarymarketforgovernmentsecurities,the amount of outright purchases in October marked a twofold increase compared to September 2007. The growth results from a sevenfold increase in EURdenominatedgovernment securities trading, and 67.9 per cent increase in BGN denominated government securities trading.

In this month there weredealsin longerthan 12M securities, where the share of the BGN denominated was 76.8 per cent (BGN 74.0 million) of the total amount,and of foreign-currencydenominated was 23.2 per cent (BGN 22.3 million), compared to87.2per centfor deals in BGN denominated longer than 12M securitiesand6.5 per centin foreign-currency denominated securitiesin September 2007.

2. CAPITAL MARKET

The following primary auction of government securities was carried out by the Bulgarian National Bank asagent of the Ministry of Finance in October:

-on 22nd October for a batch of issue BG2030107119(3Y treasury bonds) with a maturity date 7th of February2010,at the amount of BGN30million and3.80% annual interest.

In October the Bulgarian Stock Exchange – Sofia (BSE-Sofia) registered for trading on the unofficial market of bonds the following corporate bond issues:

-5Y bonds for EUR5 million issued by Evrolease AutoAD - Sofia, interest: 3M Euribor + 2.75%, issue date: 16.04.2007, 3-month coupon payment, (stock-exchange code BELA2);

-3Y bonds for EUR 4 million issued by TBI Lease EAD - Sofia, interest: 6M Euribor + 3.00%, issue date: 26.03.2007, 6-month coupon payment, (stock-exchange code BTBIL2);

-2.5Y secured bonds for EUR 15 million issued by Health and Wellness SIPC - Sofia, interest: 7.75%, issue date: 15.05.2007, 6-month coupon payment, (stock-exchange code BHWELL2).

The monthly secondary market stock-exchange turnover of municipal and corporate bonds almost doubledin Octoberand amounted to BGN 22.4 million (a daily average of BGN 1 million) compared to BGN 11.8million in September.

The pricesof EUR-denominated 2013 globalsovercamethe113% mark, and of USD-denominated 2015 globalsgot abovethe 119% level.

On the secondary market the price of the compensation instruments increased and was aboutBGN 0.46 per item. The compensation instruments market turnover marked a multifold decreaseto BGN 1.6 (a daily average of BGN 0.1million) compared with BGN 12.1 million inSeptember.

ASSET MARKETS

NET ASSETS:

equity

GROSS ASSETS:

real estate

commodities

forex

1. EQUITYCAPITAL (NET ASSETS)

The Bulgarian Stock Exchange – Sofia (BSE-Sofia) monthly turnover in shares marked a 70 per centincrease in its value in Octoberand amounted toBGN488.9million(a daily average of BGN21.3million), compared to BGN 287.6million in September, including block deals and deals registered via authorised intermediariesfor BGN39.1million andrepotransactionsfor BGN 84.1 million.

Major deals in ordinary trading were concluded mainly for shares inZPAD DZI,Chimimport AD, ElectronicaAD, Monbat AD, Sparki Eltos ADand others.

The price trend of the Bulgarian marketin Octoberin general wasin unison with the leading markets trend.

Placements of rights on shares at the amount of BGN 0.8 million were effected on the IPO market of the BSE-Sofia in October.

2. FOREIGN EXCHANGE MARKET

In October 2007 the USD exchange rate against BGN moved between 1.39334 on 09th October and 1.35380 on 31st October. The average USD exchange rate was 1.37476 which is more than 0.03 BGN lower than the previous month’s value.

In October the total turnover of the foreign exchange market reached EUR 36343.5million. The average daily turnover was EUR 1580.2million. The interbank turnover (without BNB) was, in euro terms, EUR 62.6 million. The USD trade between commercial banks was USD 8.8 million and comprised 9.8 percent of interbank foreign exchange trading.

On the interbank market, the BNB purchased EUR 8003.6million and sold EUR 8067.9million. The amount of foreign exchange that the BNB sold to budgetary organisations (equal to EUR 14.3million), exceeded BNB purchases (equal to EUR 8.4 million) by EUR 5.9 million.

The trade between commercial banks and customers amounted to EUR 4044.2million and the amount of foreign exchange that commercial banks sold (equal to EUR 2125.7million) exceeded their purchases (equal to EUR 1918.4million) by EUR 207.3million.

Non-bank financial intermediaries, licensed by the BNB for foreign exchange trading, purchased foreign exchange equal to EUR 127.2 million and sold foreign currencies equal to EUR 115.0 million.

TENDENCIES

Short-term expectations:

- withhighliquidityinthebankingsystem in July, interbankinterestratestokeep in line with the rates of the Euroarea;

- the SOFIX to movewithin the interval of 1500– 1550points;

- USD/BGN to move within 1.43-1.45.

TENDENCIES

Short-term expectations:

- the liquidity position of the banks against BNB to remain stable in November (in spite of the increased minimum required reserves and the payments to the MoF), interest rates to remain higher than those in the eurozone;

- the SOFIX to movewithin the interval of 1800 – 1900points;

- USD/BGN to move within 1.33-1.36.