Demand high, yields still above secondary market at three-month T-bill auction

Debt

The weekly auction of three-month discount T-bills was more than three times oversubscribed but the Government Debt Management Agency (AKK) sold only the announced HUF 40bn of the bills on Tuesday.

Auction yields dropped sharply from a week earlier but still exceeded the secondary market.

AKK sold the announced HUF 40bn of the bills expiring on March 14, 2012 as primary dealers bid for HUF 132.4bn, well over the HUF 103.2bn bids submitted for the same offer at the previous auction.

Average yield was 7.03%, down 29bp from the previous auction held one week earlier, soon after a downgrade of Hungary by Moody’s to junk and just before a central bank rate-setting meeting. The average auction yield was 15bp over Monday’s secondary market benchmark, calculated on bills expiring on March 7.

Yields ranged between 6.88% and 7.10%. The band was still wide but narrowed from between 6.78% and 7.41% one week earlier.

The auction was the first one since a 50bp central bank rate rise on November 29. The increase brought the base rate, which is also the yield of the NBH’s two-week zero coupon bonds, to 6.50%.

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