THE GOVERNMENT SECURITIES MARKET AND FINANCING IN 2006 AWARDS FOR THE MOST ACTIVE PRIMARY DEALERS IN 2006
Patron: Dr. János Veres Finance Minister Host: Ferenc Szarvas CEO of ÁKK Zrt. Contents: The government securities market and financing in 2006 Presented by: dr. András Réz Head of Planning, Research and Risk Management, Awards for the most active primary dealers in 2006 Presented by: Zsolt Bangó Head of Treasury Department
THE GOVERNMENT SECURITIES MARKET AND FINANCING IN 2006
THE GOVERNMENT SECURITIES MARKET AND FINANCING IN 2006 1. Borrowing requirement and financing 2. Main characteristics of government debt at the end of 2006 3. The secondary market and the role of nonresident investors
1st PART Borrowing requirement and financing
BORROWING REQUIREMENT 2003 2004 2005 2006* Deficit of the central government (excluding privatisation revenues) 733,6 890,0 544,7 1959,2 Of which: debt assumptions 31,6 180,3 415,9 Financing requirement of the Social Security Funds 345,1 422,9 469,8 124,7 Financing requirement of the extrabudgetary funds -18,8-27,9-30,4-50,1 Net borrowing requirement 1059,9 1316,7 984,1 2033,8 Capital transfers to the NBH 82,9 0,0 1,1 14,8 Privatisation revenues -42,0-166,5 0,0-268,7 Net pre-financing of direct European Union subsides 12,8 169,0 35,8 Total net borrowing requirement 1100,8 1162,9 1154,2 1815,7 Redemptions 5492,4 5530,9 6150,7 6907,4 Gross borrowing requirement 6593,2 6693,8 7304,9 8723,2 *Preliminary Significantly higher net borrowing requirement in 2006, debt assumptions and privatisation revenues decrease the market borrowing requirement
MAIN CHARACTERISTICS OF GROSS FINANCING HUF 8,881 billion worth of gross issuance. Breakdown: 91% in Hungarian forint, 9% in foreign currency. Composition of gross issuance: 61% with term-to-maturity of one year or less, 39% with term-to-maturity of more than a year. Financing in conformity with benchmarks.
GROSS ISSUANCE AND REDEMPTION IN 2006 FX loans 0% FX bonds 3% HUF loans 1% HUF bonds 22% FX loans 1,3% FX bonds 7,6% HUF loans* 4,7% HUF bonds 25,8% HUF Treasury bills 74% HUF Treasury bills 60,7% - The role of discount treasury bills is significant. - Because of HUF-debt assumptions the role of HUF loans is more significant than usually.
BOND SERIES SOLD IN 2006 EUR bn 2,5 2 1,5 1 1,8 2,1 HUF bonds 77% 1,6 0,8 1,7 0,6 1,3 1,0 1,0 FX bonds 23% 0,7 600 500 400 300 200 HUF bn 0,5 0,3 100 0 0 2009/E 2009/F 2011/B 2012/B 2016/C 2017/B 2020/A 125EUR 126EUR 127JPY 128GBP 7 HUF bond series and 4 foreign currency bond series.
MAIN CHARACTERISTICS OF NET FINANCING HUF 1974 billion of net issuance. Breakdown: 72% HUF, 28% foreign currency. Composition of the net issued securities: 84% with a term-to-maturity of more than a year, 16% with less than a year term-to-maturity. Net issuance outpaced the HUF 1816 billion net borrowing requirement resulting the increase of the balance of the Single Treasury Account (STA).
NET BORROWING REQUIREMENT AND FINANCING IN 2006 Net repos Change in STA balance Privatisation revenues Net HUF issuance Net FX Capital transfers to the NBH Central government deficit Loan assumptions EAGGF -500 0 500 1000 1500 2000 2500 Milliárd forint Net FX loans Net HUF loans Net HUF bonds Net HUF T-Bills Net FX bonds 0 200 400 600 800 1000 1200 1400 1600 1800 2000 Milliárd forint HUF loans: HUF 356 billion, HUF bonds: HUF 751 billion, HUF T-Bills: HUF 311 billion, FX loans: HUF 86 billion, FX bonds: HUF 470 billion.
2nd PART Main characteristics of government debt at the end of 2006
GOVERNMENT DEBT AT THE END OF 2006 Gross debt of central government: HUF 14,706 billion. Debt/GDP ratio: 62.4% (is not equal to Maastricht debt!) Increase in 2006: HUF 1,940 billion (15%). Out of which: Net issuance HUF 1974 billion. Net repo balance HUF 21 billion. Results of exchange rate movements and other effects HUF -13 billion.
MONTHLY DEVELOPMENT OF THE PUBLIC DEBT IN 2006 2000 1 841 1 940 1800 1600 1 667 1 595 1 650 1 568 1 658 HUF bn 1400 1200 1000 800 1 365 1 166 1 291 600 400 381 423 200 0 2006. jan. 2006. febr. 2006. márc. 2006. ápr. 2006. máj. 2006. jún. 2006. júl. 2006. aug. 2006. szept. 2006. okt. 2006. nov. 2006. dec. In the first half of the year debt dynamically increased after that a relatively stable stock each month
CHARACTERISTICS OF THE DEBT AT THE END OF 2006 Average term-to-maturity: 3.6 years (HUF-debt), 6.7 years (FX-debt). Duration: 2.6 years (HUF-debt), 4.2 years (FX-debt). Small increase (~0.1 years) in the duration of HUF-debt, small decrease by FX-debt. Currency structure: foreign currency debt 28%, HUFdebt 72%, no changes from last year (the EUR/HUF exchange rate at the end of 2006 is just slightly lower than at the end of 2005). In conformity with Composition of FX portfolio: 100% euro. the benchmarks set by the debt Interest rate composition: management HUF: 69% fixed, 31% floating-rate, strategy FX: 66% fixed, 34% floating-rate.
AVERAGE COUPON OF THE HUF-DEBT 15% 14% 13% Decreasing trend NBH reference money market rate 12% 11% 10% 9% 8% 7% 6% Average coupon of the HUF-debt 5% dec.99 márc.00 jún.00 szept.00 dec.00 márc.01 jún.01 szept.01 dec.01 márc.02 jún.02 szept.02 dec.02 márc.03 jún.03 szept.03 dec.03 márc.04 jún.04 szept.04 dec.04 márc.05 jún.05 szept.05 dec.05 márc.06 jún.06 szept.06 dec.06 Balanced maturity composition average coupon of debt slowly follows the increase of yields
3rd PART The secondary market and the role of non-resident investors
SECONDARY MARKET TURNOVER - OTC AND STOCK EXCHANGE (NOT DUPLICATED DATA) 12 000 10 000 8 000 I.quarter II.quarter III.quarter IV.quarter HUF bn 6 000 4 000 2 000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 Dynamic increase in turnover at secondary market in 2006, high outstanding stock by some bond series.
YIELDS OF GOVERNMENT SECURITIES IN 2006 % 9 8 7 6 3-month 12-month 3-year 10-year 5 2005.12.29 2006.01.29 2006.02.28 2006.03.29 2006.04.29 2006.05.29 2006.06.29 2006.07.29 2006.08.29 2006.09.29 2006.10.29 2006.11.29 2006.12.29 Stagnating yields in the first half of the year then significant yield-increase in the second half
NON-RESIDENT HOLDINGS OF HUF-DENOMINATED GOVERNMENT SECURITIES IN 2006 3 000 Non-resident holdings 318 2 900 MAX Composite index 313 2 800 308 2 700 2 600 2 500 2 400 2 300 2 200 2006.01.02 2006.01.27 2006.02.23 2006.03.23 2006.04.20 2006.05.18 2006.06.15 2006.07.12 2006.08.08 2006.09.04 2006.09.29 2006.10.27 2006.11.24 2006.12.21 HUF bn 303 298 Point 293 288 283
BREAKDOWN OF THE DEBT BY INVESTORS 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 55% 53% 52% 52% 24% 25% 28% 28% 21% 22% 20% 20% 2003 2004 2005 2006 Resident holdings of HUFdenominated debt Non-resident holdings of foreign currency denominated debt Non-resident holdings of HUF-denominated debt In the last two years importance of non-resident investors has not changed stable and strong resident investor basis.
MARKET OF GOVERNMENT SECURITIES AND FINANCING IN 2006 - SUMMARY Total net borrowing requirement was HUF 1,816 billion which was covered with HUF 1,974 billion of net issuance increasing liquid reserves. Gross debt of central government: HUF 14,706 billion. Objectives in debt management strategy accomplished. Continuous development of secondary market of government securities. The first HUF-denominated treasury bond with nominal value of more than HUF 500 billion (EUR 2 billion).
AWARDS FOR THE MOST ACTIVE PRIMARY DEALERS IN 2006
METHODOLGY OF RANKING Instead of voting, the awards are given on the basis of market share. Appreciation of the most successful primary dealers, further incentive. Only primary dealers are awarded, except in the case of the prize for repo activity. Judged by activity in the whole calendar year.
AWARD CATEGORIES Primary dealers taking one of the first three places in each category In alphabetic order.
Ist CATEGORY The primary dealer having the highest market share in Treasury Bond auctions: ING Bank MKB Bank OTP Bank
Ist CATEGORY The primary dealer having the highest market share in Treasury Bond auctions: OTP Bank
2nd CATEGORY The primary dealer having the highest market share in Discount Treasury Bill auctions: ING Bank OTP Bank UniCredit Bank
2nd CATEGORY The primary dealer having the highest market share in Discount Treasury Bill auctions: ING Bank
3rd CATEGORY The primary dealer having the highest secondary market share: CIB Bank ING Bank MKB Bank
3rd CATEGORY The primary dealer having the highest secondary market share: ING Bank
4th CATEGORY The repo partner of ÁKK with the highest repo turnover: BNP Paribas ERSTE Bank ING Bank
4th CATEGORY The repo partner of ÁKK with the highest repo turnover: ING Bank
5th CATEGORY The primary dealer increasing its market share most dynamically at the primary market: Citibank ERSTE Befektetési Unicredit Bank
5th CATEGORY The primary dealer increasing its market share most dynamically at the primary market: UniCredit Bank
THE MAIN PRIZE The determination of THE PRIMARY DEALER OF THE YEAR prize Market share in Treasury Bond auctions 25% Market share in Discount T-Bill auctions 25% Market share at secondary market 25% Market share in bond buy-backs 12,5% Repo turnover 12,5%
6th CATEGORY THE MAIN PRIZE The Primary Dealer of the Year: ING Bank OTP Bank UniCredit Bank
6th CATEGORY THE MAIN PRIZE THE PRIMARY DEALER OF THE YEAR: ING Bank
CONGRATULATIONS TO THE AWARDEES! THANK YOU FOR YOUR ATTENTION!