28 April 2020
The Magyar Nemzeti Bank will launch its government securities and mortgage bonds purchase programmes on 4 May 2020 to strengthen monetary policy transmission. The strategic parameters of the government securities programme will be established by taking into account the specificities in Hungary and the European Central Bank’s practice. The MNB’s purchases will take place in the secondary market. The weekly purchases and transactions outside the scope of auctions will render the transactions flexible. In addition to banks playing a key role in the government securities market, the MNB will also involve investment funds in the programme through the leading asset managers. The second phase of the mortgage bonds purchase programme will be announced with broadly identical strategic parameters to those of the successful programme of 2018. The MNB will continue to purchase securities under both programmes as long as economic and financial developments arising from the coronavirus pandemic corroborate it.
To facilitate effective monetary policy transmission and mitigate the economic and financial effects arising from the coronavirus pandemic, the Magyar Nemzeti Bank will launch its government securities and mortgage bonds purchase programmes on 4 May 2020. The Monetary Council decided to make asset purchases, i.e. to launch its government securities and mortgage bonds programmes, on 7 April 2020. At its meeting on 28 April 2020, another decision was made regarding the timing and strategic parameters of the two programmes.
In recent years, the long end of the yield curve has grown in importance in terms of monetary policy in Hungary as a result of the targeted central bank and government measures. The government securities and mortgage bonds purchase programmes fit well into the set of central bank instruments, and, forming a flexible framework, they also allow the MNB to influence monetary conditions at the longer part of the yield curve. The asset purchase programmes complement other central bank programmes affecting long-term yields, in particular, the scheme named Funding for Growth Go! and the Bond Funding for Growth programme, and therefore they can be considered as key instruments supporting effective monetary transmission.
The MNB’s government securities programme involves Hungarian fixed-rate forint government securities. The MNB will not restrict the scope of maturities of government securities to be purchased, nevertheless purchases will focus on securities with at least 3 year to maturity. To prevent the MNB from becoming a dominant market participant regarding a given government securities series, the amount to be purchased of any securities series may not exceed 33 per cent of stocks outstanding, in line with the European Central Bank’s (ECB) practices. Consistent with the relevant Hungarian and EU regulations and leading central banks’ practices, the MNB’s government securities purchases will take place in the secondary market at regular weekly auctions and in transactions outside the auctions. The MNB seeks to involve key participants in terms of market activity in the programme. Therefore, in addition to banks playing a major role in the government securities market, investment funds may also participate in the programme through the leading asset managers.
Simultaneously with this government securities purchase programme, the MNB will relaunch its mortgage bonds purchase programme, which contributed to providing liquidity in the mortgage bond market in 2018 and efficiently reduced market yields while creating favourable conditions for primary market issuances. The new, second phase of the mortgage bonds purchase programme will be launched with broadly identical strategic parameters to those of the successful programme of 2018. The programme continues to include long-term fixed-rate forint mortgage bonds with its total amount being 50 per cent of the issued stock. The MNB will also make purchases in the primary and the secondary markets this time.
The MNB will publish the amount of government securities and mortgage bonds, purchased at the auctions, on its website following the transactions. The amount of purchases outside auctions will be released to the public as an aggregate figure in the relevant statistics on a weekly basis. The MNB will carry out purchases under the government securities and the mortgage bonds programmes as long as economic and financial developments arising from the coronavirus pandemic corroborate it.
Information on the asset purchase programmes and the counterparties eligible to participate in government securities purchases will be published by the MNB on its website this week. The Monetary Council did not set a total amount of purchases for either programme. The MNB will perform a technical revision when stock increases reach HUF 1,000 billion in government securities and HUF 300 billion in mortgage bonds while continuously monitoring the implementation of the asset purchase programmes.