The instruments that suffered the most due to the spin Hungary’s new retail government bond took households’ investments in the early summer were investment funds, term deposits and life insurances, the central bank’s (MNB) report for second-quarter government security sales showed on Wednesday. In the first half of 2019, out of every 100 forints of new household savings, 62 went into government securities, 17 ended up as current account deposits and 10 were kept in currency. So far, the cabinet has failed to deliver its promise to reduce the use of cash, as households keep sitting on the biggest pile of cash every seen.
Private investors can subscribe the Hungarian Government Security Plus (MÁP+), dubbed ‘superbond’ since 3 June. A yield of 4.95% can be reached with it on a five-year average. The amazing popularity of the retail government security has rubbed off also on the existing the inflation-linked government security (PMÁP), and together they have caused an upheaval not only among government securities but also on the entire savings market.
The central bank’s preliminary financial accounts data published today are a hot item for they show changes on the local savings market in the second quarter, which clearly reflect the impacts of skyrocketing government security sales in June.
The gross financial assets of households rose by 9% year on year to over HUF 56,000 billion in the second quarter. Households’ net financial worth reduced by debt went up 9.4% to over HUF 47,000 bn.
At real value, the value of households’ financial assets grew by 5.4% yr/yr, which - parallel with accelerating inflation - marks a deceleration in growth in real term over the last few years.
The competition for the title of ‘the most popular type of saving’ has been fierce. Whereas term deposits had been the top choice previously, followed by current account deposits (since 2015, due to the low interest rate environment), the stock of government securities could become the largest soon enough. A total of HUF 6,572 bn worth of funds were kept in these at the end of June.
Since 2008, the stock of government securities held by households has nearly doubled. In the last six months, the growth equalled the stock households held in total ten years ago.
On the heels of current account deposits and government securities we find currency as the third most popular type of saving, with households holding about HUF 5,000 bn of it. Assets held by households in investment funds are a lot smaller than that already.
As regards types of savings worth mentioning (in the four quarters up to end-June), the only stocks that decreased were of investment notes and other deposits (mostly term deposits). Assets held by investment funds were 4.4% smaller at the end of Q2 than a year earlier. This has to do not only with low market yields and the crowding out impact of the ‘superbond’, but also the tightening of rules on real estate funds as of May.
As retail government security sales gained a sudden and massive popularity, the stock of government securities held by households grew more in the first half of 2019 than in the whole of 2018. H1 net transactions show that out of every 100 forints of new household savings HUF 62 were invested in government securities, HUF 17 were kept on current accounts and HUF 10 were left in currency.
Taking a closer look at Q2 transaction data we find that the breath-taking popularity of government securities occurred at the expense of investment notes, other deposits (mostly term deposits) and life insurances. Although these are quarter data rather than exclusively June figures, they do speak volumes of the impacts of the launch of the MÁP+.
Types of savings that carry greater risks that government securities were in luck for they fared relatively well in terms of returns in the first half. Investment funds had negative net transactions of HUF 186 bn, for instance, but these were offset to the tune of HUF 131 bn by revaluations, i.e. practically the returns achieved. Life insurances, pension funds and listed shares showed good performance in this respect, as well.
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