MÁP+ appears as a new factor in monetary policy

HUNGARY - In Brief 12 Jun 2019 by Istvan Racz

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MÁP+, the government's new 5-year retail bond started with a spectacular success. The Treasury sold a massive HUF529bn of it between between June 3-7, the first week following its debut. This raised the outstanding amount of retail bonds to HUF8060bn, according to finance minister Varga. Or perhaps it would be more accurate to say that this will be the outstanding stock on the basis of MÁP+ underwriting and other transactions registered until June 7, as soon as the underwritten amount will be fully issued. As weekly issuance was set at HUF100bn, so far HUF100bn must have been actually issued, and the next HUF100bn tranche is set to be issued on June 17. But the sales proceeds have been collected, of course, and much more may be collected, due to prospective further sales, in the forthcoming days and weeks.Yes, but where is all that money coming from? Of course, there is hardly any statistical evidence on that at this early stage, but it is quite easy to come to the preliminary conclusion that the primary source must be household deposits with banks, on which the annual average return was 0.56% for total fixed deposits and 0.99% for deposits fixed for longer than two years in April. And given the very large size of first-week MÁP+ sales, there must have been a significant negative impact on banking sector liquidity as well. Indeed, MNB data shows that the banking sector's O/N deposits placed with them fell to just HUF94bn by June 11 from HUF394bn at end-May. The latter also means that total non-sterilised bank liquidity fell to HUF124bn, from HUF748bn at the end of March, whereas the sterilisation ratio rose to 72% from only 24%.All this means that going forward, the MN...