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Foreign investors buy net HUF 126 bln forint government securities in January

Non-resident or foreign investors were net buyers of Hungarian forint-denominated government securities in January, increasing their holdings by HUF 126 billion, or around  €540 million, to HUF 2,218 billion at the end of the month, fresh data from the Hungarian government debt management agency ÁKK show. Secondary market yields dropped sharply, by 23bp-37bp in January, and the drop continued in the first days of February.

Including a $2 billion ten-year bond issued by Hungary in late January, foreign investors bought about €2 billion in Hungarian government securities during the month.

Net foreign purchases of domestic government papers in January almost matched non-residents' net sales of HUF 147 billion in December.

Secondary market government securities yields fell about one-third of a% across the board in January, as opposed to December when short-term yields were little changed or dropped, while benchmark yields over a year rose by 41-47bp.

On terms up to a year, benchmark yields were down about 400bp from peaks reached last March and at levels last seen in the autumn of 2005.

Yields of longer terms fell by 500bp from levels in March, but, with the exception of the longest terms, were still over levels in October-November 2009 -- levels about the same as those in early 2008.

Hungarian government securities yields have risen since the summer of 2007, and they jumped when the domestic bond market locked up, first in March, then in October of 2008.

Foreign investors' holdings of forint government securities fell by HUF 303 billion for the full year in 2009 after a HUF 782 billion decline in 2008. Foreign investors reduced their forint securities holdings by almost HUF 900 billion in the last three months of 2008 as the financial crisis hit Hungary. In 2007, foreign investors were still net buyers, to the tune of HUF 304 billion.

Net sales reduced the share of foreign investors of outstanding stock of forint-denominated government securities only slightly, to 21.4%, at the end of 2009 from 22.3% a year earlier, Econews calculated, because of the large, almost HUF 1,000 billion, drop in the overall stock of forint-denominated government securities. These net repayments occurred as regular bond auctions, suspended in October 2008, were restarted only in April 2009. In the first part of 2009 AKK used part of Hungary's IMF-EU loan for large-scale early repayments in order to reduce exposure and to ease the market glut. (MTI – Econews)