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Official: MNB will not buy government bonds on secondary market

Analysis

The National Bank of Hungary (MNB) plans to take further steps next year to boost banksʼ government bond purchases within the framework of its existing (self-financing) program but it will not buy bonds directly in the secondary market, MNB deputy-governor Márton Nagy told Reuters today.

“The big step can be expected early next year. The central bank wants to achieve lowering long-term (debt) yields via the market”, Nagy said, later adding that the bank wanted to “push long yields into the ground”.

Nagy said Hungaryʼs monetary policy is currently much more independent of policies pursued by the Federal Reserve and the European Central Bank.

“It does not mean that they donʼt impact us, but they impact us to a much lesser extent. When we take steps we do not want to influence [the forintʼs exchange rate] ... but we have to take into consideration the movements of the exchange rate as the moves impact [monetary] conditions,” Nagy added.

The deputy-governor said the bank would use its interest rate swaps “much more actively” by making their pricing more attractive and possibly boosting quantities. He said the lending IRS facility will always be more attractive than the IRS that helps commercial banksʼ bond purchases, which is the second most attractive tool of the bank.

Reuters also reported MNB aims to sell 100% of state-owned MKB Bank by the end of June after its remaining distressed assets are spun off into a special purpose vehicle. The central bank said investors have already submitted non-binding bids for MKB Bank. The binding round of bidding would start in January, it said.

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