Bourse listing required in MNB corporate bond scheme

Debt

Photo courtesy Budapest Stock Exchange

The National Bank of Hungary (MNB) will require securities it buys as part of a HUF 300 billion corporate bond purchase scheme to be listed on the Budapest Stock Exchange (BÉT), details of the program published on Tuesday show.

Under the Bond Funding for Growth Scheme (BGS), unveiled after a monthly policy meeting in March, the central bank will purchase HUF 300 bln of bonds issued by domestic non-financial corporations with a credit rating of "at least B+", a rating that is four notches under the investment grade threshold.

Bonds subscribed under the scheme must already be listed on the bourse, or, in the case of purchases on the primary market, the issuer must commit to listing the bonds no later than 180 days after their sale, according to a summary by state news agency MTI.

The program limits the MNBʼs purchases to 70% of a series and caps its exposure to any corporate group at HUF 20 bln. To be eligible for the scheme, companies must issue at least HUF 1 bln of bonds.

The bonds may only be denominated in forints and original maturities must be between three and ten years. The bonds may carry a fixed or variable rate, or be discounted zero-coupon securities.

The MNB will sterilize excess liquidity resulting from the proceeds from bond sales with a preferential deposit construction that pays the central bank base rate.

When unveiling the program, MNB policy-makers noted that Hungaryʼs corporate bond market lags behind those in the eurozone and in other countries in the region. MNB Deputy Governor Márton Nagy said earlier that the central bank is targeting 110 potential issuers with the scheme, which launches on July 1.

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