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THE FINANCING OF THE
CENTRAL GOVERNMENT IN
2008
MAIN TOPICS:
1. Financing in H1 2008
2. Financing in H2 2008
Host: Ferenc Szarvas, CEO
Presented by: dr. László András Borbély
Deputy CEO (General Affairs)
1. FINANCING IN H1 2008
FINANCING IN H1 2008 – ASSUMPTIONS
1. Decreasing net financing requirements (4% of
GDP in 2008)
2. Diminishing effects of the sub-prime crisis after
the end of 2007
3. The financing plan originally had been built on the
increasing role of the HUF bonds and the
decreasing role of the discount T-bills
Improving government securities market
situation –
improving budget figures
FINANCING IN H1 2008 – OUTTURN
1. The effects of the sub-prime crisis have intensified
since February 2008 (the non-resident holdings of HUF
government securities have decreased by more than
HUF 400 bn since then)
2. Substantial and concentrated net selling of government
securities due to portfolio restructuring of the pension
funds
3. Even more favourable net financing requirements (new
projection: 3.8%GDP); it helps, but does not
compensate for the unfavourable market situation
Unfavourable government securities market situation more favourable budget position
DEBT TRANSACTIONS* IN H1 2008
*Excluding debt assumptions and other foreign currency transactions
Lower net financing requirement and net issuance
DEBT TRANSACTIONS* IN H1 2008
Gross issuance and redemptions higher than planned
Lower net issuance
*Excluding debt assumptions and other foreign currency transactions
GROSS REDEMPTIONS IN H1 2008
Higher amount of bond and discount T-bill redemptions
GROSS ISSAUNCE IN H1 2008
Higher issuance of
foreign currency debt
and discount T-bills
Lower issuance of retail government securities and bonds
SECONDARY MARKET TURNOVER OF GOVT. SECURITIES
12 728
Q2 2008: falling turnover
DEVELOPMENT OF NON-RESIDENT HOLDINGS OF GOVT.
SECURITIES IN THE FIRST HALF OF RECENT YEARS
- 481
Instead of increase, a decline seen in 2008
CHANGES IN THE GOVT. SECURITIES HOLDINGS OF
INSURANCE COMPANIES AND PENSION FUNDS
429
Source: NBH
447
287
100
Modification of the investment structure
BREAKDOWN OF THE NET FINANCING BY INVESTOR
SECTORS
699
771
500
353
Foreign funds raised
in foreign currency
Strongly increasing financing by banks
FINANCING IN H1 2008 – OUTTURN
1. Lower bond issuance due to deteriorating domestic
demand; higher issuance of discount T-bills and
foreign currency debt instead
2. The originally planned amount of marketable
foreign currency issuance is practically reached
already in H1 (EUR 1.7 billion)
3. Project loans from international financing
institutions drawn down in EUR
Changes in the issuance calendar in 2008:
• 6-week auction cycle;
• the 6-month T-bill phased out;
• higher volume of individual bond series.
2. FINANCING IN H2 2008
THE PLANNED GROSS ISSUANCE IN 2008
Higher amount of foreign
currency and discount
T-bill issuance
*Excluding debt assumptions and other foreign currency transactions
Substantially decreasing bond issuance
THE PLANNED NET ISSUANCE IN 2008
Higher amount of net
foreign currency and
discount T-bill issuance
* Excluding debt assumptions and other foreign currency transactions
Significantly lower net bond issuance
DEBT TRANSACTIONS* IN H2 2008
* Excluding debt assumptions and other foreign currency transactions
Significant decrease in both gross and net issuance
GROSS REDEMPTIONS IN H2 2008
Higher amount of discount T-bill redemption;
lower amount of redemption in all other debt instruments
GROSS ISSUANCE IN H2 2008
Lower volume of issuance in all debt instruments,
except discount T-bills
SUMMARY – FINANCING IN H2 2008
1. The effects of the sub-prime crisis are seen to
prevail at least until the end of 2008.
2. The effects of the pension funds’ portfolio
restructuring are felt in H2 as well, but to a lower
extent.
3. It is necessary to keep the issuance of domestic
bonds cut back in H2 as well, in order to stabilise
the market.
4. Discount T-bills and foreign currency issuance
have a higher importance in financing in the year
2008.
SUMMARY – FINANCING IN H2 2008
5. Measures taken in order to reach long-term
strategic objectives:
• 6-week auction cycle introduced in case of govt. bonds;
• the 6-month T-bill has been phased out;
• higher volume of individual bond series.
Thank you for your attention!
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