Hungary has never borrowed this cheaply before

November 27, 2018, 5:08 pm  english version Hungarian version  
Demand was massive for a 50 billion forint lot of Hungary’s 3-month discount Treasury Bills on Tuesday, as a result of which the average yield was set to a historic low of -0.11%. This is the cheapest the Hungarian state every borrowed, or from the other angle, this is the most investors paid Hungary so that they can keep their money in T-bills for three months.

The Government Debt Management Agency (ÁKK) has received HUF 93.7 bn worth of bids from primary dealers on its D190306 series 3-m T-bills at its weekly auction on Tuesday. Accepted yields were -0.11% and -0.10%, and the average yield was set to -0.11%, which is 5 basis points lower than a week ago, and also the lowest ever, as the chart below attest.

The ample short-maturity liquidity on the interbank market is probably the reason behind this kind of negative yield, as institutional investors have nowhere else to put their money in, as they have long been crowded out of the central bank deposits. This likely played a role in the weakening of the forint over the last few days, as the cost of funds to build up speculative positions betting on HUF easing have also dropped: the 3-month BUBOR has also fallen to 0.11% from over 0.2% last month.

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