Reduced offer sold at rising yield at three-month bill auction

Debt

The Government Debt Management Agency (ÁKK) sold the announced HUF 30 bln of three-month discount T-bills at auction on Tuesday. Auction yields rose sharply from a week earlier and were also well over the latest secondary market benchmark.

ÁKK received HUF 39.2 bln bids for its reduced offer of HUF 30 bln. Demand was up from HUF 32.7 bln bids for the HUF 40 bln on offer at the previous auction on October 21 when ÁKK sold just HUF 20 bln of the bills.

ÁKK cut its auction offer from the HUF 40 bln it offered since the end of September after demand fell below the offer at the previous auction. It was the first undersubscribed three-month T-bill auction since May 2010.

The auction yield rise which started on October 21 continued, and the average auction yield rose a sharp 40 bp from the previous auction to 1.74%, the highest level since the end of July. The average yield was 19 bp over Monday's secondary market benchmark, calculated on a series expiring eight weeks later. Accepted yields moved in an unusually wide range, between 1.48% and 1.85%.

Demand for government papers fell back last week, as the undersubscribed three-month auction was followed by an unsuccessful twelve-month discount T-bill auction and an undersubscribed five-year floater auction last Wednesday. Oversubscription was also moderate at Monday's liquidity bill auction.

Bids at the three-month T-bill auctions fell under the HUF 100 bln mark in August, after the MNB wound up an almost two-year easing cycle and said the base rate could remain unchanged at 2.10% through 2015. Average yield at the auctions fell under the base rate late in April and the gap widened to 80 bp by mid-October.

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