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Demand moderate, ÁKK sells announced HUF 20 bln nine-year bonds at exchange auction

Hungary's government debt manager ÁKK sold the originally announced HUF 20 billion nominal value of 2019/A government bonds due in 2011 and 2012 at a bond exchange auction on Wednesday.

Demand for the nine-year bonds totaled HUF 35.5 billion, the larger part in exchange for the two-year bond. The bonds sold at yields above the ten-year benchmark.

This was the first exchange auction for such long bonds, and the average yield gap - the premium offered for exchanging short bonds for longer ones - was 159 basis points if the nine-year bonds were paid for with one-year bonds and 90bp if paid for with the two-year 2012/B bonds.

ÁKK sold the announced HUF 10 billion of the nine-year bonds on offer against HUF 9.1 billion 2011/B bonds after receiving bids for HUF 15.7 billion. The debt manager sold another HUF 10 billion of 2019/A bonds against payment with HUF 9.4 billion of 2012/B bonds. Bids with payment with the two-year bond totaled HUF 19.8 billion.

The 2019/A bonds sold at an average yield of 7.25% if paid with 2011/B bonds and at a 7.24% average yield in exchange for the 2012/B bond. The closest, ten-year secondary market benchmark, calculated on the 17-month longer 2020/A bonds, was 7.15% on Tuesday.

ÁKK calculated the 2011/B bonds as payment at a price equal to a yield of 5.66% while 2012/B bonds as payment at a yield of 6.34%, the former above the 5.55% one-year benchmark yield and the latter below the closest, 6.89% three-year benchmark, which could explain more interest in that exchange.

The 2019/A bonds on sale were the previous ten-year benchmark bond which was last auctioned on June 3, 2010. They will mature on June 26, 2019, and carry a 6.50% coupon. The volume outstanding on the market will rise to HUF 598 billion on the August 11 settlement day, Econews calculated based on ÁKK figures for June 30.

The 2011/B bonds accepted as payments, were issued first in January 2006 and mature on October 12, 2011. They carry a 6.00% annual coupon. The volume outstanding of the series will fall to HUF 353 billion after settlement of the auction.

The 2012/B bonds were first issued October 2006 and mature on June 12, 2012. They carry a fixed 7.25% annual coupon. The exchange auction will cut the volume outstanding to HUF 491 billion.

Previously, ÁKK offered a shorter bond, the 2014/C, at its exchange auctions launched late last year. It held the last such auction on April 28 when it sold just HUF 3.5 billion of 2014/C bonds against 2012/B and 2012/C bonds instead of the announced HUF 20 billion as worries about the debt crisis in Greece reduced demand. (MTI – Econews)