The National Bank of Hungary (NBH) has sold HUF 515.55 billion worth of two-week zero coupon bonds at a tender on Tuesday. As HUF 645.1 billion worth of bonds will expire on Wednesday, the volume of two-week bonds at the central bank will drop to HUF 998.55 bn from HUF 1,128.1 bn a week ago.
The two-week facility is the central bank's main market liquidity management tool that ensures not only a drain for excess liquidity but is also a highly important means for interest rate policy.
The bank replaced its two-week deposits by dematerialised, zero-coupon NBH bonds on 5 January this year.
Zero-coupon bond is a debt security that does not pay periodic interest (coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.
It is really hard to pinpoint a trend in the hectically changing volume of two-week bonds, but we can state that the volume is only HUF 261 bn down from the end-March peak.
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