Azernews.Az

By Bloomberg

Hungary’s borrowing costs fell to a record at the first auction of Treasury-bills after the central bank announced steps to boost demand for government debt by changing its monetary policy tools.

The debt management agency sold 43 billion forint ($156 million) in 12-month bills on Thursday at an average yield of 1.19 percent. That was the lowest for the maturity since at least 2000, according to government data. Investors offered to buy 98.5 billion forint in notes, compared with a planned sale of 40 billion forint.

Demand for the securities increased after the National Bank of Hungary said it will replace its two-week deposit with a three-month instrument as its benchmark from Sept. 23, to channel lenders’ cash toward state debt. While the move may have an easing effect on policy, it’s up to the Monetary Council to determine the impact on rates, central bank Executive Director Marton Nagy said Tuesday.

“There’s a visible increase in demand for government debt,” Sandor Jobbagy, a Budapest-based analyst of Intesa Sanpaolo’s CIB Bank unit, said by phone. The market is increasing bets the central bank will lower its benchmark rate to below 1.5 percent, he said.

The forint gained 0.1 percent to 312.69 per euro by 1:22 p.m. in Budapest, after dropping to the weakest in more than four months. The yield on Hungary’s benchmark 10-year government notes fell three basis points to 3.7 percent after jumping 21 basis points on Wednesday amid a global bond rout.

The central bank is focused on the inflation outlook and may continue cutting interests rates after the forint’s recent drop, Gyula Pleschinger, a member of the policy-setting panel, said in a phone interview Wednesday. The council lowered the two-week deposit rate to 1.65 percent from 1.8 percent on May 26, the third consecutive 15 basis-point cut.