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Hungary central bank buys HUF 78.5m of five-year FHB mortgage bond at auction

The National Bank of Hungary (NBH) said Monday it purchased HUF 78.5m nominal value five-year mortgage bonds issued by FHB Jelzálogbank at an average yield of 8.14pc at an auction on October 21.

The auction purchase was the central bank's sixth mortgage-bond purchase on the primary market under a programme the bank launched in February.

Each of the six purchases involved the same series FHB bonds: FJ15NF01 bonds which mature on September 14, 2015 and carry a fixed 8.0pc coupon.

Including the current purchase, the central bank has bought a total of HUF 36.3bn of the FJ15NF01 series five-year FHB bonds at auctions held since March 11.

The average yield of the purchase fell from 8.27pc at the previous NBH purchase when the central bank purchased 1.63bn of the bonds. The yield of the current purchase compares to a five-year secondary market government securities benchmark, calculated on the five months longer 2016/C bonds, of 6.81pc at the day of the auction.

In line with the conditions announced for primary purchases under the programme on February 25, the central bank purchased at the average yield in the bids of investors outside the issuer's group, and the volume purchased was 20pc of the total HUF 423.7m bonds purchased by outside-of-FHB-group investors at the reoffering.

FHB received HUF 4.67bn bids and sold just HUF 423.7m of FJ15NF01 bonds at the October 21 auction, the seventh auction of the bond, bringing total issues of the series to HUF 46.67bn. The NBH figure reveal that all the bonds sold at the auction were taken up by investors outside the FHB group. Accordingly, the average auction yield was the same as the 8.14pc yield at which the NBH purchased. The maximum auction yield was 8.35pc.

The NBH announced early February it plans to purchase up to HUF 100bn mortgage-backed bonds on the primary and secondary market by the end of 2010 to improve market liquidity and help bring down borrowing costs.

In addition to its primary market purchases, the NBH has bought HUF 27.4bn in mortgage bonds on the secondary market under the programme. (MTI Econews)