Are you sure?

AKK raises offer sharply on high demand at bond auction

The Government Debt Management Agency (AKK) raised its offer for all the three fixed-rate bonds on strong demand at an auction on Thursday, selling a combined HUF 62.5 billion instead of the announced HUF 45 billion. Yields dropped sharply from the previous auction, following the drop of secondary market yields since the previous auction.

Combined subscriptions totaled HUF 169 billion, up HUF 61 billion from the previous auction of the same bonds on January 13 when AKK sold HUF 55 billion of the three bonds against a HUF 45 billion offer at the auction and an additional HUF 5.5 billion at a non-competitive tender following the auction.

Thursday auction demand focused on five-year bonds which made up more than half of all bids, but the other bonds were also more than two-fold oversubscribed.

AKK sold HUF 25 billion of the 2014/D three-year bonds at the auction, raising its original offer by HUF 5 billion after primary dealers bid for HUF 57.7 billion. They bid for HUF 70.3 billion at the January 13 auction. Average yield was 6.90%, 5bp over the secondary market benchmark and 52bp below the yield at the previous auction of the bonds two weeks earlier. Yields ranged between 6.88% and 6.92%.

AKK sold HUF 22.5 billion of the 2016/C five-year bonds, raising its original offer by HUF 7.5 billion. Primary dealers bid for an extraordinarily high HUF 84.3 billion as against HUF 37.1 billion two weeks earlier. The average yield was 7.07%, 4p under the secondary market benchmark and 55bp lower than the yield at the previous auction. Yields ranged in a narrow band between 7.05% and 7.08%.

AKK sold HUF 15 billion of the ten-year bonds, HUF 5 billion more than the original offer. Dealers bid for HUF 27.0 billion after seeking HUF 20.6 billion of the bonds at the previous tender. The average yield was 7.25%, 3bp under the secondary market benchmark and 53bp below the yield at the previous auction. Yields ranged between 7.23% and 7.27%.

AKK offered the three-year and the ten-year series for the second time on Thursday. The three-year 2014/D carries a 6.75% annual coupon and will expire on August 22, 2014. It replaced the 2014/ bond which expires six months earlier on January 12, 2014, and has a lower coupon of 5.5%. The new ten-year series is the 2022/A bond, which expires on June 24, 2022, and has a 7% annual coupon. It has most almost two years more to maturity and a 0.5 percentage points lower coupon than the outgoing 2020/A bond.

The secondary market benchmark yields are yet calculated on the old 2014/C and 2020/A bonds which will be replaced as benchmark bonds by the 2014/D and 2022/A series, respectively, on February 2. (MTI-Econews)