Higher coupons on HUF government bonds sold to households

HUNGARY - In Brief 21 Feb 2019 by Istvan Racz
ÁKK is raising the coupons it pays on the HUF-denominated half-year government bond sold only to households to 2.5% from 2%, and on the similar one-year bond to 3% from 2.5%, from February 25. In addition, the 5-year inflation-indexed household bond's coupon will jump to 4.5% from 4.1% after the interest payment day on February 21, because of the upward adjustment of inflation component of the coupon value to the 2.8% recorded in 2018.As is well-known to our readers, the current market yields on the government bonds that are accessible to institutional investors are 0.24% for six months, 0.37% for one year and 2.16% for five years. Consequently, it appears that when ÁKK says it wants to increase the share of household bonds it actually means it. Just as a reminder, ÁKK intends to sell HUF1260bn of government debt in net terms in 2019, of which HUF800bn would be household bonds, HUF1094bn other HUF debt, whereas there would be a net repayment of FX debt equivalent to HUF634bn, with essentially no new issuance of FX debt this year. At end-2018, HUF-denominated household bonds gave 26.2% of the total outstanding debt owed by the central government.

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