ÁKK’s USD bond issue five times oversubscribed

Debt

The $3 billion issue of five- and ten-year dollar bonds by Hungary on Tuesday was almost five times oversubscribed, the Government Debt Management Agency (ÁKK) has reported. ÁKK sold $1 billion of the 4% fixed-rate five-year bonds at 260 bp over US Treasuries. It sold $2 billion of the 5.375% fixed-rate ten-year bonds at 287.5 bp over the benchmark. ÁKK said it would use the proceeds from the sale for “general financing purposes.”

The five-year bond sold at a 4.15% yield and the ten-year bond at 5.55%, Econews calculated based on the respective US treasury yields at the time of the pricing on Tuesday. ÁKK said that the issue price is 99.356% of nominal value for the five-year bond, expiring on March 25, 2019, and is 98.663% for the ten-year bond, due on March 25, 2024. Compared to mid-swaps, the five-year bond was sold at a 250 bp spread and the ten-year bond at a spread of 276 bp. The coupons fell and the spreads narrowed compared to Hungary’s last comparable dollar bonds.

Hungary last issued $2 billion of ten-year bonds at 325 bp over the corresponding US treasury and carrying an annual coupon of 5.75% in November 2013. The last five-year dollar bond, of $1.25 billion, was issued in February 2013. It has a 4.125% annual coupon and was sold at 335 bp over the corresponding US treasury.

The €5.4 billion in 2014 FX expiries includes €2.7 billion of bonds, of which Hungary already repaid a €1 billion bond in January. A £500 million bond is due on May 6, and a €1 billion bond is due on July 28. ÁKK said earlier that FX expiries in the first half will be financed from the proceeds of last November’s $2 billion dollar bond. 

Thanks to the success of the dollar bond sale, Hungary has now fulfilled two-thirds of its foreign currency bond financing plan for this year, ÁKK representatives announced yesterday. “Further bond issuance [in 2014] may happen depending in the situation in domestic and international capital markets.” This year, the ÁKK planned to issue €3.3 billion (approximately $4.56 million) worth of foreign currency debt in global markets.

Hungary is currently rated Ba1 by Moody’s, BB by Standard and Poor’s and BB+ by Fitch Ratings.

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