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AKK sells announced bond volumes as auction demand drops from peaks

The Government Debt Management Agency (AKK) sold the announced HUF 45 billion of its standard mix of three fixed rate bonds at an auction on Thursday. Demand was close to twofold, dropping sharply from more than fivefold oversubscription two weeks earlier. Yields dropped sharply from the previous auction but were up from Wednesday's benchmarks.

Combined subscription for the three-, five- and ten-year fixed-rate bonds totaled HUF 84.2 billion down from an exceptionally high HUF 238.4 billion on March 24. from an already strong HUF 170.7 billion at the previous auction on March 10, when AKK also raised its sales by HUF 20 billion to HUF 65 billion.

Auction demand dropped sharply for the three-year and the ten-year bonds. The auction was the first one since February 10 without a rise in auction sales compared to the pre-announced volumes.

AKK sold the announced HUF 30 billion of three-year bonds. Primary dealers submitted bids for HUF 41.3 billion as against an extraordinary HUF 108.1 billion on March 24. Average yield was 6.49%, 8bp over Wednesday's secondary market benchmark, and 19bp under the yield at the previous auction of the bonds two weeks earlier.

AKK sold HUF 15 billion of five-year bonds, as planned. Dealers bid for HUF 27.1 billion of the bonds, after bidding for HUF 99.9 billion at the previous auction. Average yield was 6.74%, 6 base points over the secondary market benchmark and 29 base points under the yield at the previous auction of the bonds two weeks earlier.

AKK sold the announced HUF 10 billion of ten-year bonds after receiving bids for HUF 15.8 billion as against HUF 30.3 billion at the previous auction. Average yield was 6.98%, 2bp up from the secondary market benchmark and 22bp under the yield at the previous auction.

The moderate demand came after two auctions with exceptionally high oversubscription. AKK raised its auction sales by HUF 20 billion to a combined HUF 65 billion at both of the previous two auction.