CEE: Central banks reduce and foreign investors increase sovereign bond holdings

On the radar

• The Hungarian central bank kept the policy rate unchanged at 6.5%.
• Producer prices remained unchanged in July in Slovakia.
• Unemployment rate in Poland increased to 5.45 in July.
• Today, average gross wage in Hungary will be published at 8.30 AM CET.
• At 11 AM CET Croatia releases 2Q25 GDP data including the GDP structure.

Economic developments

The latest Global Debt Report 2025 published by the OECD looks, among all, at the sovereign debt investor base in the OECD countries. In particular, it focuses on changes in investor composition over last couple of years. At the aggregate level (all OECD countries), central bank holdings of domestic sovereign bonds fell from 29% of total outstanding debt in 2021 to 19% in 2024, while domestic households’ share grew from 5% to 11%, and that of foreign investors from 29% to 34%. Further, foreign investors absorbed the reduction in central bank holdings in most euro area countries (within the region namely Slovakia or Baltic countries). In Poland, reduction of central bank holdings was mostly covered by o Monetary Financial Institutions, while in Slovenia by households. In Hungary, share of foreign investors holdings increased the most in recent years.

Market movements

Hungarian central bank kept the policy rate unchanged at 6.5% and there is nothing new to report regarding the domestic monetary policy stance. Preserving the positive real interest rates remained a crucial factor of communication. Market pricing currently indicates a maximum one rate cut for the remainder of the year. If global and regional interest rates develop according to our current knowledge in the coming months, then we still believe a 25-bps rate cut by the end of the year is possible. The CEE currencies strengthened against the euro as global developments support such development (concerns about monetary policy in the US).

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