ÁKK cuts retail sales, raises HUF and FX bond issues in updated 2020 financing plan

ÁKK updated its issue plan in the light of increasing financing needs with deteriorating economic prospects, including dropping retail demand for government securities, and a higher accrual-based government deficit target, raised to 2.7% of GDP from 1%, due to the pandemic.

The cash flow-based deficit of the central government rises by HUF 1.234 trillion from HUF 367 billion to HUF 1.601 tln as a result, ÁKK said.

At the same time, ÁKK said it now expects HUF 590 bln more redemptions by private individuals than originally, and in the light of current trends, it cut its gross retail sales plan by HUF 900 bln, to HUF 3.255 tln. 

Gross government securities sales have to rise with the higher cashflow deficit, the expected drop in retail securities sales due to the pandemic, plus a January HUF 244 bln worth short FX bond repurchase which was not part of the original issue plan, ÁKK said. The increase is to come from forint and FX bonds.

The debt manager raised the plan for gross forint bond issues to institutions by HUF 1.652 tln to HUF 3.669 tln, mainly through the weekly auctioning of three- and five-year auctions introduced early April. It plans to maintain and, if possible, carefully increase the issue of 10-, 15- and 20-year bonds.

The debt manager said it also raised the target number for FX bond issues to the "equivalent" of EUR 4 bln from EUR 1 bln, adding that it "will carry out issues that lengthen the remaining maturity of government debt and diversify the investor base if market conditions are appropriate". 

Issuing green bonds denominated in euro, Japanese yen, or, if possible in Chinese yuan remained on the agenda, ÁKK said. It will continue to actively manage the maturity structure of forint and FX debt through exchange, reverse auctions and secondary market purchases, it added.

ÁKK noted that even after the increase the 2020 gross financing requirement and gross issues are lower than the respective 2019 figures. 

The agency added that it had completed 24% of the modified market bond sales plan and 39% of the modified retail securities sales target by the end of March.

ÁKK said that it still maintains its midterm strategic plan to raise the retail government securities stock held by households to HUF 11 tln from HUF 7.766 tln at the end of 2019.

Similarly, the debt manager continues to maintain its other strategic targets, those related to raising the maturity of debt and to keep FX debt at a low level, ÁKK said.