MNB starts buying bonds under 10 years in QE program

MNB

MNB headquarters in Budapest (Image by Jessica Fejos)

The National Bank of Hungary (MNB) bought HUF 55 billion of securities in the framework of a quantitative easing program in the week ended January 31, buying terms under 10 years for the first time since the spring, in line with a recent policy decision, Hungarian news agency MTI reports, citing data released by the central bank.

MNB bought HUF 35 bln of government bonds at a weekly auction and HUF 20 bln outside of auction

The scale of the MNB's weekly QE purchases has been around HUF 50 bln-55 bln since October, when policymakers decided to raise the threshold for certain series and to expand the range of assets to include government-guaranteed debt securities, such as those issued by Magyar Eximbank and the Hungarian Development Bank (MFB).

MNB's Monetary Council said after a monthly policy meeting on January 26 that they would maintain their policy stance but reallocate liquidity from the NBH's collateralized lending facility to its QE program, stepping up purchase volume and standing ready to expand purchases to securities under 10 years.

"The [MNB] will continue to apply a flexible approach to the amount of its weekly government securities purchases, increasing its direct purchases in the secondary market relative to the past," the council said.

The latest weekly QE data show the central bank started buying securities maturing in under 10 years outside of auction, including HUF 2.3 bln of 2030/A bonds, HUF 1.2 bln of 2028/A bonds, HUF 1.7 bln of 2027/A bonds and HUF 4.1 bln of 2026/E bonds.

MNB made no purchases of non-government securities with state guarantees during the week.

The total purchases made in the framework of the QE program reached HUF 1,240.3 bln on January 31, including HUF 1,198.7 bln of government securities and HUF 48.3 bln of bonds from other issuers with government guarantees.

MNB rate-setters performed a "technical revision" on the QE program at their November policy meeting and said the next technical revision would be performed when the stock reaches HUF 2 trillion.

The central bank launched the QE program in the spring "to prevent damage...to monetary policy transmission and manage economic and financial risks arising from the coronavirus pandemic".

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