Demand for Hungary’s 3-month discount Treasury bills was the weakest in 18 months today. Primary dealers have placed HUF 48.3 billion worth of bids on a HUF 40 bn lot of 3-m T-bills (D140305) at an auction held by the Government Debt Management Agency (ÁKK). In response, the issuer allotted only HUF 30 bn of the instrument. This marks the lowest volume of funds raised in the line of 3-m T-bill auctions in nearly two years.
The ÁKK lowered the offered volume of 3-m bills to HUF 40 bn from HUF 50 bn two months ago. This move had to do with the fact that approaching year-end it has a clearer vision of debt financing developments, but even in view of this the bid/cover ratio came ou low at 1.2x. As a response to the extremely subdued demand the issuer allotted HUF 10 bn less of the T-bills than it originally intended to. Accepted yields were between 2.83% and 2.98%, averaging 2.94%, which marks a new all-time low and is 7 basis points higher than Monday’s benchmark fixing, but 3 bps below the average yield at the previous auction of the instrument a week ago.
The 2.94% average yield indicates that the market is pricing a base rate below 3% for the next three months, but in view of forward rate agreements (FRAs), the market is not expecting monetary easing to continue that far (in view of these it could stop at around 3.00%.)
The Monetary Council of the central bank (NBH) is to announce its monthly policy decision soon. The market projects another 20bp cut to a record low of 3.20%.
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