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Astounding Demand for Hungary’s New ‘Super Bond’

Péter Cseresnyés 2019.06.12.

Hungary’s newest retail government bond, the Hungarian Government Security Plus (MÁP Plusz), is immensely popular: more than HUF 500 billion has been purchased in a single week, which is the highest weekly turnover on the Hungarian market yet.

In May, Minister of Finance Mihály Varga announced a 14-point plan meant to shield the economy from the impact of a global slowdown and to reinforce long-term economic growth.

With the new measures, the government’s main goal is to keep its target of maintaining Hungary’s GDP growth at least two percentage points higher than the EU average. The planned actions include tax cuts, growth incentives, and the issue of a new government bond with a gradually rising interest rate. This new government bond has become a huge success since its recent introduction, mainly due to its immensely favorable interest rate and also being a secure investment guaranteed by the state.

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In a recent statement, Varga reported that between June 3rd and June 7th, HUF 529 billion of this new bond was secured. This is the highest amount recorded in Hungary, with no other retail government bond selling this well in only one week.

The Minister of Finance also emphasized that the new government bond would not only benefit the Hungarian people, but would also strengthen Hungary’s stability. The goal of the government is to protect the economic results achieved so far, which may be further helped along by the stronger involvement of the Hungarian people in debt financing, Varga added.

The new government security is one of the safest investments, which is not only tax-free but it also has a high-interest rate, yielding a total of 27.35% return over five years.

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The securities are issued with a tenure of 5 years, with the denomination of HUF 1.00 and with fixed interest rates predetermined for each interest period. The series of these securities are offered for sale continuously during a successive one-week subscription period, at par (100%). The 5-year maturity starts on the first business day of the week following the closing of each subscription period.

The bonds also carry a highly preferential interest rate, starting at 3.5%, and after purchase, at the end of the fifth year, the interest rises to 6%. In addition to the state treasury and banks, housing savings funds will also take part in the trading of these securities.

The Hungarian Government Security Plus can be purchased and transferred by resident and non-resident individuals. Non-residents may acquire and transfer this security in accordance with effective foreign exchange laws.

In the featured photo: Minister of Finance Mihály Varga. Photo by Szilárd Koszticsák/MTI.