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Demand for early buyback high, yields up at reverse auction

Debt

The Government Debt Management Agency (ÁKK) bought back HUF 72.0 bln of the HUF 85.7 bln bids it received for the early repurchase of three bonds maturing in 2015 and early 2016 at a reverse auction on today, Hungarian news agency MTI.

Both demand and the volume repurchased almost tripled from two weeks earlier, and was over usual levels. After dropping for several auctions, early repurchase yields rose from the October 15 auction, but were still well below the closest secondary market benchmarks.

Demand for the early redemption was probably mirroring low interest and rising yields at the latest short-term government securities auctions, which suggested that the yield drop ongoing for most of the year had ended. The large accepted volume despite relatively low yields/high prices could indicate that the debt manager is keen on reducing state debt as the year-end nears.

ÁKK accepted HUF 30.6 bln of the HUF 30.7 bln of bids submitted by primary dealers for the early redemption of 2015/A bonds which mature on February 12, 2015. Average yield was 1.43%, up from 1.29% two weeks earlier.

ÁKK accepted HUF 6.0 bln of the HUF 15.6 bln of bids for early redemption of 2015/C bonds, which mature on August 24, 2015. Average yield rose to 1.52% from 1.40% on October 15.

ÁKK accepted HUF 35.4 bln of the HUF 39.4 bln bids for early redemption of 2016/C bonds which mature on February 12, 2016. This was the first early repurchase of 2016/C bonds.

The six-month and twelve-month secondary market benchmark yields were 1.71% and 1.70%, respectively, on Tuesday.

Demand was the highest since the middle of the May when demand for the early redemption of bonds expiring in August jumped on the NBH's plan to replace its two-week bonds with deposits, thus denying access to foreign investors, from August 1.

Including the current auction, ÁKK has repurchased a combined HUF 467 bonds ahead of maturity at this year's 14 reverse auctions. It bought back HUF 518 bln at 22 reverse auctions in the full year of 2013.

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