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Erste holds its first mortgage bond auction

Debt

Erste Mortgage Bank held the first public auction of its mortgage bonds yesterday, as part of its HUF 200 bln mortgage-backed bond program, Hungarian news agency MTI reported.

Erste Mortgage Bank said it auctioned three-year bonds with 2% fixed interest and five-year bonds with 2.5% fixed interest. Both papers will be introduced on the Budapest Stock Exchange on October 19. 

Investors submitted a combined HUF 72 bln bids for the bonds at the auction and Erste accepted more than HUF 20 bln of the bids. 

Erste issued more than HUF 10 bln of the three-year bonds at nominal value with an average yield of 1.9%, and almost HUF 10 bln of the five-year bonds with an average yield of 2.48%.  

Erste Bank Hungary introduced its mortgage-backed bond program and created Erste Mortgage Bank to meet Mortgage Funding Adequacy Ratio (MFAR) criteria of the National Bank of Hungary. 

Banks have until April 1, 2017 to comply with the requirement set by a June 2015 MNB decree to back at least 15% of their net mortgage loans with long-term liabilities. Financial institutions with less than HUF 3 bln retail mortgage loan stock - considered as non-significant players in the segment - are exempt from the requirement.

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