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Hungary central bank buys HUF 1.6 billion of five-year FHB mortgage bond at auction

The National Bank of Hungary (MNB) purchased HUF 1.632 billion nominal value five-year mortgage bonds issued by FHB Jelzálogbank at an average yield of 8.27% at an auction on September 20, the MNB website shows.

The auction purchase was the central bank's fifth mortgage-bond purchase on the primary market under a program the bank launched in February.

Each of the five purchases involved the same series FHB bonds, namely FJ15NF01 bonds which mature on September 14, 2015 and carry a fixed 8.0% coupon.

The central bank has bought a total of HUF 7.17 billion of the FJ15NF01 series five-year FHB bonds at auctions held on March 11, April 14, May 10, August 10 and the September 20 auction. Yields of the MNB purchases were 8.18%, 7.20%, 7.89%, 8.10% and 8.27%, respectively.

The yield of the current purchase compares to a five-year secondary market government securities benchmark, calculated on the five months longer 2016/C bonds, of 6.85% at the day of the auction.

In line with the conditions announced for primary purchases under the program on February 25, the central bank purchased again at the average yield in the bids of investors outside the issuer's group, and the volume purchased was 20% of the total HUF 8.16 billion bonds purchased by outside-of-FHB-group investors at the reoffering.

FHB received HUF 9.70 billion bids and sold HUF 8.51 billion of FJ15NF01 bonds at the Monday auction, the sixth auction of the bond, bringing total issues of the series to HUF 46.25 billion. The MNB figure reveal that HUF 350m of the bonds sold at the auction were taken up by investors within the FHB group. The average auction yield was 8.27%, the yield at which the MNB purchased, and the maximum auction yield was 8.8.35%.

The MNB announced early February it plans to purchase up to HUF 100 billion mortgage-backed bonds on the primary and secondary market by the end of 2010 to improve market liquidity and help bring down borrowing costs.

In addition to its primary market purchases, the MNB has bought HUF 26.8 billion in mortgage bonds on the secondary market under the program. (MTI-Econews)