GOVERNMENT SECURITIES MARKET QUARTERLY REPORT Q3 2017

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1 MARKET QUARTERLY REPORT Q3 17

2 The deficit of the central government amounted to HUF 1,36.3 billion (about EUR. billion) in Q3 17. The net financing need were decreased by HUF 16.5 billion of the net balance of transfers from the European Union and other sources. Thus, the total net financing need amounted to HUF 1,73.8 billion in Q3 17. Net issuance was HUF 1,86. billion, out of which net HUF denominated issuance was HUF 1,6. billion and net foreign currency denominated redemption was HUF 33.5 billion. The total amount of other liabilities decreased by HUF 33. billion in Q3 17. ÁKK had set up benchmarks to maintain the optimal cost-risk characteristics of public debt. The 9-day moving average values of those benchmarks at the end of Q3 17 were as follows: The share of foreign currency denominated debt within the total debt decreased to.9. 1 of the foreign currency debt was denominated in euro. The fixed-floating mix of the foreign currency debt portfolio was The fixed-floating mix of the HUF-denominated debt was 59. and.8 respectively. The duration of the HUF-denominated debt was.9 years. All benchmark targets were met in Q3 17. The short term yields and the long-term secondary market yields also decreased in Q3. The month yields decreased by 9-1 basis points, the 3 year yield decreased by 3 basis points, and the year yields were lower by 1-55 basis points compared to Q. At the end of the 1-year benchmark yield stood at -., the 3-year yield at.51 and the 1-year yield at.58. The liquidity in the secondary market was lower by 9 than the previous quarter. OTC turnover of government securities in Q3 amounted to HUF 1,365.1 billion. Primary dealers, who account for the decisive part of all secondary government securities trading, made 79 of their secondary government securities deals with non-resident investors. The volume of non-resident holdings of Hungarian government securities increased by HUF 186. billion from end- and amounted to HUF 3,59. billion at the end of. This amount represented 18. of domestic government securities. The credit rating of the long-term foreign currency denominated debt of Hungary was: BBB- (Standard & Poor s); Baa3 (Moody s); BBB- (Fitch) as at Standard & Poor s revised Hungary s sovereign credit outlook to positive from stable in. The EUR/HUF exchange rate according to the National Bank of Hungary was on the last working day of. Government securities QUARTERLY REPORT

3 MACROECONOMIC INDICATORS GOVERNMENT SECURITIES GDP growth (yearly average) Industrial production Unemployment rate () (3-month average) Consumer price index (yearly change) Consumer price index (yearly average) Consumer price index (monthly change)..1.1 Producer price index (yearly change) Producer price index (yearly average) Producer price index (monthly change) Net lending position of housholds (HUF Bn) ,18. 1,9.5 1,66.5 1,7.8 1,78.,65.1 1,59.7 Current account of balance of payments (EUR M) -7, , ,89. 1,587. 3, ,966.8 Net direct investments (EUR M) 3, ,81.1 -, ,9.6-1, ,98. -1,93. -1,91.8 Balance of the central government budget (HUF Bn) , , ,19. -1,81. Balance of the central government budget (GFS, per cent of GDP) Balance of the central government budget (ESA, percent of GDP) Central government gross debt (HUF Bn) 18, ,96.9,1.,955.5,7.1 1, ,881.1, ,3. 5,96.1 6,8. 6,376. Central government gross debt (per cent of GDP) Net foreign debt (EUR M) 6 5,5.9 53, ,31.8 7,88. 5, ,5.1 3, ,6.6 1,79.7 Net foreign debt (per cent of GDP) HUF/USD mid exchange rate at the end of period HUF/EUR mid exchange rate at the end of period Same period of previous year = 1, working day adjusted 3 Non-consolidated data In case of yearly data: /previous, otherwise month/same month of the previous year Including intercompany loans 5 Excluding privatisation proceeds 6 Excluding intercompany loans Source: KSH, MNB, PM/NGM, ÁKK 3 1-year Hungarian and eurozone benchmark yields during the last twelve months Source: Bloomberg, ÁKK 3 31 The exchange rate of the Hungarian Forint during the last twelve months Source: MNB year Hungarian sovereign benchmark yield 1-year euro benchmark yield 1-year Hungarian sovereign yield spread HUF/EUR exchange rate HUF/USD exchange rate Monthly balance of the central government budget (excluding privatisation proceeds) Gross borrowing requirement 3 Source: MNB, 1,8 Source: NGM, ÁKK 1,6 1 1, 1, , October 16 January 17 Budget balance excluding net interest payments Net interest payments Monthly balance October 16 January 17 Monthly deficit (+) / surplus (-) of the central budget Redemptions Borrowing requirement of the Social Security and extrabudgetary funds Net balance of EU transfer prefinancing Total borrowing requirement 3 Government securities QUARTERLY REPORT

CENTRAL GOVERNMENT GROSS DEBT GOVERNMENT SECURITIES 9 1 11 1 13 1 15 16 17 17 HUF BILLION 1. Forint denominated debt 1,76. 1,978. 1,36. 1,. 1,976. 1,61. 16,7.9 18,3.9 19,596. 19,76.6,51.3 1.1. Loans 38.

6 9,368.1 11,77.1 1,18.3 13,87.7 15,6.3 17,56.7 18,679.9 18,88. 19,135.1 1..1.1. Bonds 7,519. 7,965.8 7,353. 8,18.1 8,588.8 9,88. 11,3. 11,56. 11,99. 11,677.7 11,875.3 1..1.. Discount T-bills 1,67.

4 CENTRAL GOVERNMENT GROSS DEBT GOVERNMENT SECURITIES HUF BILLION 1. Forint denominated debt 1,76. 1,978. 1,36. 1,. 1,976. 1,61. 16,7.9 18,3.9 19, ,76.6, Loans Government securities 1,37.5 1,37. 9, ,75.6 1, , , , , , , Public issues 9,613. 1,19.6 9, ,77.1 1, , ,6.3 17, , ,88. 19, Bonds 7,519. 7, ,353. 8,18.1 8, ,88. 11,3. 11,56. 11,99. 11, , Discount T-bills 1,67.3 1,618. 1,5.9 1,96.5 1,9.9 1, Retail securities ,688.5,11.1 3,517. 5,67.9 6, , , Private placements Foreign currency denominated debt* 8,68.5 8,8.8 1,17. 8,36.6 8,9.9 8, , ,56.5 5,88.7 5, , Loans,11.5,9.8,58.1 3,31.5,735.6,16.3 1, ,11.6 1,71.6 1,76.3 1, Foreign loans,11.5,9.8, ,9.,. 1, ,61. 1,97.6 1,71.6 1,76.3 1, Domestic loans Government securities,35.,55. 5,71.3 5,1.1 6, , ,39. 5,15.9,777.1,815.3, Issued abroad,35.,55. 5,71.3,9. 5, ,8.6 5,198.9,618.9,19.3,17.1, Issued domestically Total 18,9.8 19,81.,53.6,369. 1,881. 3, ,93.7,687. 5,.9 5, ,976.9 Other liabilities Total central government debt 18,96.9,1.,955.5,7.1 1, ,881.1, ,3. 5,96.1 6,8. 6,376. Marketable HUF debt ( ) 9,59.9 1,1.8 9,97.6 1,89.1 1,68. 11, , ,98. 1,36.6 1,58.7 1,66.6 Gross debt/gdp *Foreign exchange debt is recorded at the mid exchange rate of the NBH at the end of the year/month. 17 Composition of HUF government securities as at Currency composition of the foreign exchange debt portfolio before swaps as at * Retail government securities. Discount Treasury Bills 3.9 CNY 1. EUR 1.8 USD 56.1 Floating rate bonds 17. Fixed rate bonds 58.7 JPY.9 * Composition before swaps. By using cross-currency swaps, 1 of the actual foreign exchange debt of the central government was due in euros. Maturity profile of the central government gross debt over the next 1 months, as at Duration and average term-to-maturity of the HUF and foreign currency debt portfolios Years 1 3 October 17 January Discount Treasury Bills Government Bonds Foreign exchange debt Other debt HUF debt duration HUF debt average term-to-maturity Foreign exchange debt duration Foreign exchange debt average term-to-maturity Government securities QUARTERLY REPORT

5 GOVERNMENT BOND AUCTION RESULTS Government Bond /C /B 7/A 1/A /C /B 7/A 1/A /C /B 7/A 1/A /C ISIN code HU358 HU366 HU3118 HU995 HU358 HU366 HU3118 HU995 HU358 HU366 HU3118 HU995 HU358 Maturity (in years) Coupon Auction 1th auction 1th auction 31st auction 5th auction 15th auction 15th auction 3nd auction 6th auction 16th auction 16th auction 33rd auction 7th auction 17th auction Date of auction Date of financial settlement Redemption date Maximum annual yield () - ISMA Minimum annual yield () - ISMA Average annual yield () - ISMA Maximum annual yield () - EHM Minimum annual yield () - EHM Average annual yield () - EHM Maximum price () Minimum price () Average price () Amount offered for sale (HUF million) 15,. 15,. 1,. 5,. 15,. 15,. 1,. 5,. 15,. 15,. 1,. 5,. 15,. Amount of bids submitted (HUF million) 11,7. 3,6. 15,56.,. 6,9. 3,97. 17,55. 1,1. 35,. 8,1.75 8,87.,8. 9,5. Amount of bids accepted (HUF million) 9,99.99,5. 9, , , ,5. 5,. 15,. 1, , , ,. Bid-to-cover ratio Bids submitted (pcs) Bids accepted (pcs) Tail (average price - minimum price) Market sales (HUF million) 9,99.99,5. 9, , , ,5. 5,. 15,. 1, , , ,. Non-competitive offer (HUF million).,.. 1,75.38., , ,9.,8.,67.68, Total amount sales (HUF million) 9,99.99,5. 9, ,5.35., , ,96. 16,9. 17, , , ,6. GOVERNMENT BOND AUCTION RESULTS Government Bond /B 31/A 1/A /C /B 7/A 1/A /C /B 7/A 1/A /C /B 7/A ISIN code HU366 HU31 HU995 HU358 HU366 HU3118 HU995 HU358 HU366 HU3118 HU995 HU358 HU366 HU3118 Maturity (in years) Coupon Auction 17th auction 13th auction 8th auction 18th auction 18th auction 3th auction 9th auction 19th auction 19th auction 35th auction 3th auction th auction th auction 36th auction Date of auction Date of financial settlement Redemption date Maximum annual yield () - ISMA Minimum annual yield () - ISMA Average annual yield () - ISMA Maximum annual yield () - EHM Minimum annual yield () - EHM Average annual yield () - EHM Maximum price () Minimum price () Average price () Amount offered for sale (HUF million) 15,. 1,. 5,. 15,. 15,. 1,. 5,. 15,. 15,. 1,. 7,. 15,.,. 1,. Amount of bids submitted (HUF million) 57,5. 16,5. 3,61.7,5. 69,. 19, ,15. 6,5. 159, ,6.1 3, ,36. 56,5. 35,5.1 Amount of bids accepted (HUF million), ,. 7, ,., ,. 7, ,.,5. 1, , , ,. 17, Bid-to-cover ratio Bids submitted (pcs) Bids accepted (pcs) Tail (average price - minimum price) Market sales (HUF million), ,. 7, ,., ,. 7, ,.,5. 1, , , ,. 17, Non-competitive offer (HUF million) 5,7.77 1,.,39. 3,9. 1,76.8 3,7.78, ,8. 8,8. 5, , ,3.,91.3 Total amount sales (HUF million) 7, ,. 9, ,9. 3, ,7.78 9,939.98,8. 3,78., , , ,3.,91. 5 Government securities QUARTERLY REPORT

6 3-year government bond auctions 5-year government bond auctions year government bond year government bond auctions INTEREST RATE RESETS OF FLOATING RATE GOVERNMENT BONDS IN Q3 17 Government bond Date of interest rate reset Interest period Date of interest payment Reset interest rate Interest payable 18/J /P /D /P /R /D /J /N /C /Q /A /N /N Government securities QUARTERLY REPORT

7 7 6 3-month Discount Treasury Bill and Liquidity Discount Treasury Bill auctions month Discount Treasury Bill auctions PRIMARY DEALERS - AS AT 3 SEPTEMBER 17 BNP Paribas SA CIB Bank Zrt. CITIBANK Europe Plc. Deutsche Bank AG ERSTE Befektetési Zrt. Goldman Sachs International ING Bank N.V. J.P. Morgan Securities Plc. K&H Bank Zrt. Magyar Takarékszövetkezeti Bank Zrt. Merrill Lynch International MKB Bank Zrt. OTP Bank Nyrt. Raiffeisen Bank Zrt. UniCredit Bank Hungary Zrt. Benchmark yields in the past three months Percent month 1-year 3-year 1-year Benchmark yield curves Percent Maturity in years Government securities QUARTERLY REPORT

Secondary market trading of Hungarian government securities (OTC) Secondary market trading of Hungarian government securities (MTS Hungary trading) 7, 6, Source: KELER, ÁKK 1, 9 8 18, MTS Hungary 1 9

of primary dealers' secondary market turnover in government bonds by investor groups in Q3 17 Households. Credit institutions 8.5 Brokerage Primary Institutional firms dealers.9 5. investors.

8 Secondary market trading of Hungarian government securities (OTC) Secondary market trading of Hungarian government securities (MTS Hungary trading) 7, 6, Source: KELER, ÁKK 1, , MTS Hungary ,, 3,, 1, October 16 January 17 October 16 January 17 Bonds (left scale) Discount T-bills (right scale) Bonds (left scale) Discount T-bills (right scale) Breakdown of primary dealers' secondary market turnover in government bonds by investor groups in Q3 17 Households. Credit institutions 8.5 Brokerage Primary Institutional firms dealers.9 5. investors.9 Companies.8 Public sector.8 Companies 3.6 Breakdown of primary dealers' secondary market turnover in Discount Treasury Bills by investor groups in Q3 17 Public sector 1.7 Foreign investors 6.3 Households 1. Credit institutions 5.6 Brokerage firms. Foreign investors 78.9 Institutional investors 3.7 Primary dealers. Primary dealers' trading with different investor groups in Q3 17 1, 11, 1, 9, 8, 7, 6, 5,, 3,, 1, Foreign investors Credit institutions Institutional investors Primary dealers Households Quarterly turnover Average deal size Companies Brokerage firms Public sector 1,8 1,6 1, 1, 1, 8 6 HUF million Government securities with the highest secondary market turnover in Q3 17 Government security Date of redemption Turnover () 5/B.6.5 1,7.1 7/A , /D /A /B /B /A /A /B /B Government securities QUARTERLY REPORT

9 Non-residents' holdings of Hungarian government securities during the last year and the MAX index 3,8 3,7 Source: KELER 7 7 3,6 7 3,5 3, points 3,3 6 3, Non-residents' holdings (LHS) MAX Composite index (RHS) 6 3, HUNGARIAN GOVERNMENT SECURITIES INDICES Value of the index Annual yield earned on the index portfolio MAX index RMAX index MAX Composite index ZMAX index MAX index RMAX index MAX Composite index ZMAX index OUTSTANDING AMOUNT OF BENCHMARK GOVERNMENT BOND SERIES IN Q3 17 Government bond REUTERS PAGES (CODES) main page: HUTREASURY /C /B /A /A Auction results are available from 11.3 (CET) HUISSUE HUAUCTION1 HUAUCTION HUAUCTION3 HUAUCTION HUBUYBACK HUEXCHANGE HURETAIL Secondary market data HUBONDFIX HUBONDAKK, HUBONDAKK HUBONDAKK, HUBONDAKK3 HUBONDINDEX1 HUBONDINDEX HUMAXCOMP1, HUMAXCOMP HUAKK1,HUAKK,HUAKK3 Other HUFLOATER HUBONDINFO Publication of the following issues and reverse auctions Discount T-bill auction results Government Bond auction results Non-competitive fixed rate bonds offer Non-competitive floating rate bonds Government Bond buyback auction results Government Bond exchange auction results 6-month Interest Bearing Treasury Bill underwriting results Benchmark yield fixing (updated during CET) Best morning secondary market quotations Best afternoon secondary market quotations Hungarian Government Total Return Index (MAX), updated during CET Benchmark Indices for Governmnet Bonds BMX3Y-15Y (updated during CET) Hungarian Government Total Return Index (MAX) statistics MAX Composite Index Interest rate reset of floating rate bonds Primary Dealers FURTHER INFORMATION PAGES: Bloomberg pages (code): GDMA Homepage: Government securities QUARTERLY REPORT

GOVERNMENT SECURITIES MARKET QUARTERLY REPORT Q1 2017

GOVERNMENT SECURITIES MARKET QUARTERLY REPORT Q1 2017 MARKET QUARTERLY REPORT Q1 17 The deficit of the central government amounted to HUF 198.1 billion (about EUR.6 billion) in Q1 17. The net financing need were decreased by HUF 8. billion of the net balance