MNB purchase of FX-denominated Hungarian government bonds continues in October

Debt

MNB headquarters in Budapest (Image by Jessica Fejos)

The National Bank of Hungary (MNB) bought HUF 123.7 billion in FX-denominated bonds issued by the State of Hungary in October, MNB data on securities transactions published yesterday show.

The purchases were under a FX bond (re)purchase program, dubbed REPHUN, launched by the MNB in June. The program, in harmony with the bankʼs self-financing program aimed at shifting budget finance towards HUF and to local investors, looks to reduce external debt and vulnerability through buying foreign-currency-denominated bonds issued by the State of Hungary on the secondary market. As part of the program, the MNB mainly buys bonds expiring in the short term, MNB director Mihály Hoffman said in November.

The secondary market purchases started with buys of HUF 83.8 bln in July. The purchases picked up in October after a lull in August and September, and reached a combined HUF 215.9 bln in July-October.

Including some cross-rate effects, the stock held by the MNB was worth HUF 217.9 bln at the end of October, the figures show.

Prior to July of this year, the Bank did not buy or hold such bonds.

Foreign investors sold a total of HUF 291.2 bln of such bonds in July-October, and their stock fell by a combined HUF 296.5 bln in those four months to HUF 6.682 trillion. Their share in all Hungarian sovereign FX bonds fell 3.4 percentage points in the four months to 79.3% at the end of October.

Non-residents have typically been net sellers of the bonds in the past few years, and the bonds sold were taken up by the Hungarian financial sector.

In October alone, foreign investors sold HUF 138.7 bln worth of FX-denominated Hungary state bonds, their largest monthly sale in a month without any major redemption since April 2010, the period for which the MNB breakdown is available.

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