Hungarian retail investors continue to pile into domestic government bonds

Hungarian retail investors continue to pile into domestic government bonds

By bne IntelliNews October 17, 2017

The stock of government bonds held by households rose by HUF154bn (€500mn) September to an all-time high of HUF6.5 trillion, Hungary’s Government Debt Management Agency (AKK) said on October 16. The increase came after a drop in August, the first decline in the holdings of retail investors in six months.

Local bonds represent a growing share in debt financing, as retail investors held 25% of the country’s total debt at the end of September, AAK said. The government made it a priority to reduce the share of foreign currency debt within Hungary's total debt to reduce exposure to global market fluctuations and to increase the average maturity of debt instruments.

The stock of investments by retail investors expanded by HUF1.4 trillion in the first nine months of 2017, which is twice the amount targeted by the debt manager for the full-year.

Retail investors, faced with a lack of investment options in the near-zero interest rate environment, have been stocking up in huge volumes on government bonds, which have offered yields well above inflation. Given the strong demand, the AKK even lowered interest rates and trimmed fees for banks and sellers of the instruments to make it less lucrative as it sold nearly two times its issuance plans

The central budget’s share of non-forint debt fell from 45% in 2010 to around 23%, the AKK said.

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