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Local Curve Trades Steeper Following Govt Savings Decree

HUNGARY
  • The Hungarian local curve trades modestly steeper Thursday, helping keep the front-end within range of multi-month lows. Moves follow government decree out late yesterday outlining plans to incentivise government bond investments by increasing tax levied on bank deposits, non-government bonds and mutual funds.
  • Nagy this morning outlining the expected benefits of the policy tweak: higher institutional and retail demand for government bonds - totaling HUF 1.8trl from institutions and "hundreds of billions" from retail.
  • Possible evidence of early impact of the policy: Hungary's DMO sold HUF 54bln of 3-, 5- and 10-yr bonds this morning vs. HUF 30bln offered - indicating firm demand.
  • Markets remain on watch for any negative European Parliament headlines, as MEPs look to prevent Budapest from assuming the rotating Presidency. While the headlines may appear negative, the vote will not have any impact on Article 7 or the freezing of certain EU funds.

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