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Hungary won't cut back forint bond sales in rest of 2014
October 1, 2014 / 1:22 PM / 3 years ago

Hungary won't cut back forint bond sales in rest of 2014

BUDAPEST (Reuters) - Hungary’s debt agency AKK is not planning to cut back forint bond sales in the rest of 2014 as several factors will reduce the public debt to GDP ratio anyway by the end of December, a senior AKK official said on Wednesday.

Laszlo Borbely, deputy chief executive of AKK, told the Reuters Eastern Europe Investment Summit that the goal was for debt to GDP to decline from 79.4 percent at the end of 2013.

The debt level rose to 85 percent of GDP by the end of the second quarter, which Borbely said was due to higher forint debt sales in the first six months as the AKK front loaded issuance.

He said that reflected higher demand, partly because of changes made by the National Bank of Hungary to its main liquidity management tool. That forced foreign banks to buy more government bonds.

Borbely said Hungary’s $3 billion dollar bond issue in March had pre-financed foreign currency debt that matured in July and November, and that those expiries, totaling 3 billion euros, would also help reduce debt in the second half of the year.

The forint’s exchange rate will be the third, decisive factor, he said. About 40 percent of Hungary’s debt is denominated in foreign currency.

“A stronger forint than the current exchange rate would make it easier to achieve the goal (of a declining debt ratio),” Borbely said.

Borbely said there was no need to cut back forint bond sales in the rest of the year, as the amounts offered at weekly treasury bill auctions have already been lowered. The AKK is currently offering 40 billion forints worth of three-month bills at auctions and selling 50 billion of the bills, instead of 60-90 billion earlier this year. This will also reduce debt.

Borbely also said that next year foreign currency debt expiries will be significantly lower than this year. The AKK says on its web page that next year about 2 billion euros worth of foreign currency bonds will expire.

“We expect to refinance next year’s foreign currency expiries in forints, that’s our approved strategy,” he said, adding that the 2015 financing plan will only be published in December, after approval by the Economy Ministry.

Neighboring Romania plans to issue a Eurobond before the end of this year to pre-finance its 2015 needs, the finance ministry’s deputy treasury director told Reuters earlier on Wednesday.

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Reporting by Krisztina Than and Sandor Peto; Editing by Catherine Evans

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