Download 2002

The Government Bond Market
in Hungary
László Búzás, Managing Director
ÁKK Rt.
June 17, 2002
2002
The Debt
•
•
•
•
•
Gross debt: HUF 7720 billion (2001)
~ 52,3% of GDP
79% Bonds and T-Bills – 21% Loans
70% HUF – 30% foreign currency denominated
(foreign currency debt has been continuously
decreasing since 1997 according to the debt
management strategy)
External debt: 44%
2002
Government
Market Debt/GDP
Harmonisation
90%
EMU Market Conventions
80%
70%
The Maastricht criterion
60%
50%
40%
30%
20%
10%
0%
1990
1991
1992
Market forint debt
1993
1994
1995
1996
1997
Non-market forint debt
1998
1999
FX debt
2000
2001
2002
2002
The Instruments
• Treasury Bills with 3,6 and 12 month maturity
• 3,5,10 and 15 year bonds
• Less bond lines - benchmarks
• Larger bonds series - liquidity
• retail paper: 1 and 2 year maturity
• No private placements and, as a rule, no loans
2002
Volume of Government Bonds Outstanding
vs. Benchmark Issue Size (US$ billions)
20
UK
Benchmark Issue Size
18
USA
16
14
FRANCE
12
10
ITALY
BELGIUM
GERMANY
8
JAPAN
CANADA
6
NETHERLANDS
4
2
SWEDEN
SWITZERLAND
0
HUNGARY
0
500
1,000
1,500
2,000
2,500
Amount Outstanding
3,000
3,500
4,000
2002
Primary dealers
• 158 auctions in 2001(104 T-bill and 54 bond)
• Reverse auctions (11)
• Primary dealers: 8 banks, 5 brokerage firms
• 84% of issuance
• 90% of secondary market turnover
2002
Ownership Structure of the Domestic
Marketable Debt
National Bank of Hungary
Commercial banks, spec. fin. int.
Households
Foreign investors
Voluntary Pension Funds
Investment Funds
Insurance companies
Companies and other investors
Total
1997
4,7%
32,1%
18,4%
3,8%
1,8%
8,7%
9,7%
20,8%
100,0%
1998
1,9%
30,1%
21,6%
10,9%
2,8%
8,7%
9,6%
14,4%
100,0%
1999
0,7%
20,0%
22,2%
13,5%
5,2%
11,0%
11,5%
15,9%
100,0%
2000
2001
0,0%
0,0%
19,2% 18,1%
21,5% 20,4%
19,8% 24,7%
7,2%
7,8%
7,1%
5,7%
12,4% 13,0%
12,9% 10,3%
100,0% 100,0%
2002
Foreign Investors
• Foreign holding of HUF denominated debt: HUF
1272 billion
• An increase of approximately HUF 200 billion since
December 2001
• HUF 100 billion in T-bills
• 40% of marketable bonds
• Average life 3.2 years
2002
EU-accession
• The real change comes with EMU-membership
• Best practices of the peer EMU-member countries
• Main goal: creation of a competitive, efficient and
EMU-compatible government bond market
• Market development
• Market harmonisation
2002
Market Harmonisation
Market Conventions
• Price quotation
• Settlement circle
• Coupon payment frequency
• Yield calculation
• Business days (TARGET)
• Redenomination
2002
Market Development
• Auction Rules and Procedures
• Abolition of the minimum price
• Amount 34% instead of 25%
• Exclusion of the off-market price
• Non-competitive bids
• Auction frequency
2002
Product Innovation
• More standardized products
• Abolition of the 2 year T-bond and the 5 year FRN
• Lengthening of the yield-curve: Introduction of the
15 year bond
• Less bond series
• Larger bond series
• Issuance of T-bills for liquidity management
purposes
2002
Primary Dealers: The Future
•Liberalisation of capital movements
•Non-resident (remote) primary dealers
•New category of market makers (dedicated
dealers, auction participants)
•Widening of the investor base
2002
Secondary Market
• Change in the benchmark quotation
• Buy-back auctions
• Exchange auctions
• Repo facility
• Price quotation instead of yield quotation
• Increased requirements for price quotation (amount,
spread)
• Multilateral international trading platform
2002
More information
www.akk.hu
Thank you for your attention
2002