The Government Bond Market in Hungary
description
Transcript of The Government Bond Market in Hungary
László Búzás, Managing DirectorLászló Búzás, Managing Director ÁKK Rt.ÁKK Rt.
JuneJune 17 17, 2002, 2002
The Government Bond Market
in Hungary
2002
The Debt
• Gross debt: HUF 7720 billion (2001)• ~ 52,3% of GDP• 79% Bonds and T-Bills – 21% Loans• 70% HUF – 30% foreign currency denominated
(foreign currency debt has been continuously
decreasing since 1997 according to the debt
management strategy)• External debt: 44%
2002
EMU Market Conventions
Market Harmonisation
2002
Government Debt/GDP
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Market forint debt Non-market forint debt FX debt
The Maastricht criterion
The Instruments
• Treasury Bills with 3,6 and 12 month maturity• 3,5,10 and 15 year bonds• Less bond lines - benchmarks• Larger bonds series - liquidity• retail paper: 1 and 2 year maturity• No private placements and, as a rule, no loans
2002
2002
Volume of Government Bonds Outstanding vs. Benchmark Issue Size (US$ billions)
SWITZERLAND
SWEDEN
NETHERLANDS
CANADA
GERMANY
BELGIUM
JAPAN
ITALYFRANCE
UKUSA
0
2
4
6
8
10
12
14
16
18
20
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
Amount Outstanding
Benc
hmar
k Is
sue
Size
HUNGARY
2002
Primary dealers
• 158 auctions in 2001(104 T-bill and 54 bond)
• Reverse auctions (11)
• Primary dealers: 8 banks, 5 brokerage firms
• 84% of issuance
• 90% of secondary market turnover
2002
Ownership Structure of the Domestic Marketable Debt
1997 1998 1999 2000 2001National Bank of Hungary 4,7% 1,9% 0,7% 0,0% 0,0%Commercial banks, spec. fin. int. 32,1% 30,1% 20,0% 19,2% 18,1%Households 18,4% 21,6% 22,2% 21,5% 20,4%Foreign investors 3,8% 10,9% 13,5% 19,8% 24,7%Voluntary Pension Funds 1,8% 2,8% 5,2% 7,2% 7,8%Investment Funds 8,7% 8,7% 11,0% 7,1% 5,7%Insurance companies 9,7% 9,6% 11,5% 12,4% 13,0%Companies and other investors 20,8% 14,4% 15,9% 12,9% 10,3%Total 100,0% 100,0% 100,0% 100,0% 100,0%
2002
Foreign Investors
• Foreign holding of HUF denominated debt: HUF
1272 billion
• An increase of approximately HUF 200 billion since
December 2001
• HUF 100 billion in T-bills
• 40% of marketable bonds
• Average life 3.2 years
2002
EU-accession
• The real change comes with EMU-membership
• Best practices of the peer EMU-member countries
• Main goal: creation of a competitive, efficient and
EMU-compatible government bond market
• Market development
• Market harmonisation
2002
• Price quotation
• Settlement circle
• Coupon payment frequency
• Yield calculation
• Business days (TARGET)
• Redenomination
Market Harmonisation
Market Conventions
2002
Market Development
• Auction Rules and Procedures
• Abolition of the minimum price
• Amount 34% instead of 25%
• Exclusion of the off-market price
• Non-competitive bids
• Auction frequency
2002
Product Innovation
• More standardized products
• Abolition of the 2 year T-bond and the 5 year FRN
• Lengthening of the yield-curve: Introduction of the
15 year bond
• Less bond series
• Larger bond series
• Issuance of T-bills for liquidity management
purposes
Primary Dealers: The Future
2002
•Liberalisation of capital movements
•Non-resident (remote) primary dealers
•New category of market makers (dedicated
dealers, auction participants)
•Widening of the investor base
2002
Secondary Market
• Change in the benchmark quotation
• Buy-back auctions
• Exchange auctions
• Repo facility
• Price quotation instead of yield quotation
• Increased requirements for price quotation (amount,
spread)
• Multilateral international trading platform