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Demand high at reverse auction

Demand was unusually high at Wednesday's reverse auction of Hungary's Government Debt Management Agency (ÁKK), and ÁKK accepted HUF 32.5 billion of the combined HUF 51.9 billion offers it received from primary dealers to sell its 2011/B and 2012/B bonds ahead of maturity.

The ÁKK accepted none of the combined HUF 26.5 billion offers to sell early at the previous reverse auction on June 15.

Offers for the early redemption of 2011/B bonds totaled HUF 119.5 billion of which the ÁKK accepted HUF 10.8 billion. 2011/B bonds, issued first in January 2006, will expire on October 12, 2011 and carry a 6% annual coupon.

The average repurchase yield came to 5.84%, down from 5.91% at the last successful repurchase of the same bonds on June 1, and down from the 5.85% three-month benchmark yield on Tuesday, calculated on discount T-bills expiring on November 16.

The repurchase will reduce the stock outstanding of the series to HUF 292 billion, Econews calculated.

Demand by primary dealers to sell 2012/B bonds early totaled HUF 32.4 billion, and the ÁKK accepted HUF 21.7 billion of the offers. 2012/B bonds were first offered in October 2006, they will expire on June 12, 2012, and they bear a 7.25% coupon.

The average repurchase yield was 5.83%, 7 basis points below the closest twelve-month benchmark, and up 1bp from the previous repurchase on June 1. The stock outstanding of the series will fall to HUF 388 billion on settlement on July 6.

Settlement of the auction will coincide with the settlement of Thursday bond auction where the ÁKK will offer HUF 20 billion of its 2014/D three-year benchmark bonds, HUF 15 billion of 2017/A bonds and HUF 10 billion of 2028/A bonds.

The auction was the ninth reverse auction held this year, and raised the volume bought back at this year's reverse auctions to HUF 102.9 billion.