Hungarian debt manager reports strong demand for foreign currency bonds

On Monday morning, Portfolio reported that the Hungarian government has already entered the foreign currency bond market with 3 different maturities.

The Reuters news agency reported in the afternoon that there was demand for Hungarian paper worth $10.5 billion. This is a significant oversubscription, if we assume that Hungary was looking to raise an extra USD 3-4 billion in financing from the international bond market, as previously announced.

The 5-year bond was initially set to yield 175 basis points above the relevant US paper, but this was reduced to 150 basis points based on the quotes. The 10-year bond was initially set to yield 205 basis points above the relevant US paper, but this has fallen to 180 basis points on a quoted basis. The 30-year bond was originally set to yield 235 basis points above the relevant US paper, but this narrowed to 205 basis points on the basis of quotes.

In other words, a yield reduction of 25 to 30 basis points was realised on the various maturities compared to the original plans, given the strong demand.

This means that the Hungarian government has borrowed foreign currency at lower yields (cheaper) than planned. This development is not surprising at all, as we have already indicated in our previous article that the original spreads are indicative price levels targeted by the Government Debt Management Agency (ÁKK), which may change depending on demand, and if there is a strong interest, the spreads may narrow.

The final yield levels will be determined after the swap to the euro, after which it will be possible to judge more accurately how expensive or cheap this current borrowing has been.

The debt manager's report

In connection with the issue, Portfolio contacted the ÁKK, which confirmed that

the pricing phase of the issue has been completed and a significant book has been built up.

“Due to the documentation of the bond, the ÁKK will provide information on the business details after the settlement of the transaction,” they added. In other words, the amount of the foreign currency source and the pricing will be known within a few days.

Cover photo (for illustration purposes only): Getty Images