The most important goal of public debt management is to finance the government debt and the central government deficit at the lowest costs in the long run, taking account of risks. In order to provide optimal financing, the ÁKK has established benchmarks, which define the composition of public debt. These benchmarks set the currency and the fixed-floating rate composition of public debt and the duration target of domestic debt. ÁKK also aims at a simple and public issuance policy and the development of a transparent and liquid secondary market to reach its strategic objective.
The international capital market crisis hit hard the government securities market of Hungary as well. As a reaction to the crisis ÁKK aims to further develop the domestic government securities market because of an ever stronger competition for investors and the need to enhance the market infrastructure. As a part of its policy ÁKK aims to widen its primary dealer system by the increased participation of remote primary dealers, and by the development of price quotation and building up larger bond series by regular reopening of already existing series.
The limited liquidity of the secondary market requires a more active primary market activity from ÁKK. There are several measures ÁKK has introduced so as to increase flexibility in reacting to market demand: more bond series are offered at the bond auctions, which are also supported by the new non-competitive top-up phase after the auction to better serve investors’ needs. Beside bond buy-back auctions ÁKK has started regular bond exchange auctions in order to help manage duration targets of investors and at the same time to smoothen the maturity profile of the public debt. ÁKK has also introduced new instruments, like the 5-year floating rate bond and a special inflation-linked retail bond.
The most important challenge in the coming years will be the repayment of the IMF/European Commission loan assistance due from 2011. ÁKK prepares for this task with a more flexible financing policy and the accumulation of financing reserves (cash cushion).
