Hungary cut 3-month Treasury bill auction

ANALYSIS | 10/22/2014 09:23:45 GMT

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Governor Belka signals further rate cut

Hungary cut 3-month Treasury bill auction

Central European currencies were little changed on Tuesday. With the absence of regional and also global stimuli the Hungarian forint was able to wipe out some of its Monday’s gains and the Czech koruna together with Polish zloty remained around its current levels.

Regarding government bonds in Central Europe, yields remain currently very low across the board. Moreover, in Poland expectations of further rate cuts are now leading short maturities towards lower levels. Yesterday, NBP’s governor of Belka said that the central bank should concentrate on moves in a very short time. It is very likely that the next rate cut in Poland will come already on the NBP November’s meeting. There will be a released Polish retail sales for September data tomorrow, which if confirms that the Polish economy is slowing might trigger expectations of bigger rate cut and push short end of the yield curve even lower.
Low yields were probably also behind the reduction of offered amount of Hungarian three-month Treasury bills at the auction yesterday. The Hungary’s debt management agency (AKK) had to halve an offered amount to only 20 bn. HUF, as the demand reached only 33 bn HUF. The average yield was 1.34 %, 4 bps higher from all-time low reached at an auction last week. It is worth adding that in April the NBH changed its main two-week T-bills to deposits with the same maturity in order to bar foreign investors from this instrument and force them to invest into Treasury bills. So, yesterday it was the first time since November 2013 when the AKK sold less Treasury bills than had planned.

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