Hungarian gov't presses the yield curve - short government bond yields take a huge hit
The benchmark yield on 3-month paper fell by 105 basis points compared to Friday, while the yield on 1-year paper also fell by 43 basis points. The steep fall is due to government intervention, which has effectively imposed a mandatory allocation for investment funds that also hold government bonds.
Bond funds, equity funds and mixed funds must have a minimum 60% weighting of securities in their portfolios (to be met from 1 July), with almost exclusively Hungarian government securities (with some exceptions) in their debt securities. The government has even tightened the rules on liquid assets, as 20% of them must be held in discount Treasury bills (short-term government bonds).
At the time of the announcement, we could already see that the measures were having a downward effect on yields, but in the week before the deadline, the fall gathered momentum, no doubt due to increased demand. At the time of the announcement, Minister of Economic Development Márton Nagy explained in a background briefing that the measures could result in some HUF 1,800 billion of additional demand from institutions in the government bond market, of which HUF 500 billion from investment funds.
| Date | Maturity | Security | Yield (%) | Change in one day | Change in a month |
| 2023-06-26 | 3M | D231018 | 10.04 | -1.05 | -3.34 |
| 2023-06-26 | 6M | D240124 | 10.12 | -0.18 | -3.41 |
| 2023-06-26 | 12M | D240430 | 10.87 | -0.43 | -1.94 |
| 2023-06-26 | 3Y | 2026/H | 8.97 | -0.19 | -0.86 |
| 2023-06-26 | 5Y | 2028/A | 7.82 | -0.18 | -1 |
| 2023-06-26 | 10Y | 2032/A | 7 | -0.15 | -1.04 |
| 2023-06-26 | 15Y | 2038/A | 6.72 | -0.12 | -0.67 |
| 2023-06-26 | 20Y | 2041/A | 6.79 | -0.08 | -0.52 |
| Source of data: ÁKK | |||||
Compared with a month ago, the benchmark yield on 6-month paper fell by 341 basis points and the yield on 20-year government bonds fell by 52 basis points.
Cover photo: Nick Dolding
