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Summer Measures Boost Gov't Securities Demand

Analysis

Measures the government took in the summer to boost demand for government securities have "proven extraordinarily effective", resulting in marked increases in the stock of debt held by both retail and institutional investors, the Economic Development Ministry said on Tuesday, according to a report by state news wire MTI.

 

The introduction of a 13% social contribution on investment returns, on top of the 15% tax on capital gains, from July 1 generated direct and indirect demand for about HUF 1.2 trillion of retail government securities, which are exempt from both taxes, the ministry said.

Retail deposit stock fell by around HUF 400 bln amid that demand and reached HUF 11.723 tln by the end of August. At the same time, households' holdings of government securities climbed to HUF 11.942 tln, exceeding deposit stock, an unprecedented development, the ministry said.

The ministry noted that banks were required from October 1 to start informing retail clients of the returns they might have seen on their savings if they had put them in government securities, rather than bank deposits, in the past year.

Institutional investors' holdings of government securities climbed 40% close to HUF 1.8 trillion in a little less than three months to August, as the government allowed lenders to deduct part of the bank levy against increases in stock of bonds and raised government security thresholds for investment fund portfolios.

Since the measures were rolled out, non-residents' holdings of government securities have dropped by almost HUF 84 bln and their share of state debt has edged under 30%, the ministry said.

T-bill issues are more than HUF 280 bln over the target for the year and bond issues some HUF 640 bln over the plan, while yields have fallen "markedly", the ministry added.

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