Hungarian government extends the deposit rate freeze

As reported by Portfolio several times, the government decided last year to cap the interest rate on bank deposits of Hungarian institutional investors and retail customers with more than 20 million bank deposits at the yield on 3-month discount Treasury bills. In March this year, it was also decided to ban the unlimited transfer of central bank discount bonds.

The aim of both measures was to prevent Hungarian market participants from bypassing the government bond market to obtain higher yields than government bonds, and to stimulate demand for Hungarian government bonds.

It is another matter that foreign investors still have this opportunity.

The above two restrictions were originally only due to expire on 30 June, but under amendments to the regulation published in last night's Hungarian Official Gazette, the ban on interest rate caps on deposits and the ban on the transfer of discount bonds have also been extended to 30 September.

Therefore, government bonds remain the main liquid asset, although other government actions have triggered a very steep fall in short government bond market yields:

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