To counter the effects of inflation, new government securities are introduced in Hungary, while existing ones are also updated to provide safe options for savings and investment in Hungary.
Announcement by the Government Debt Management Agency
Starting from 19 September, interest rates will be increased as follows:
- One Year Hungarian Government Securities (EMÁP): from 4.75% to 7%
- One Year Treasury Savings Bills (one-year KTJ): from 4.75% to 7%
- Two Year Treasury Savings Bills (two-year KTJ): from 5.50% to 7.5%
Moreover, starting from 29 September,
- The Bonus Hungarian Government Securities (BMÁP) will be introduced again. It is issued for 3 years, and it has a variable interest rate that is tied to the performance of the 12-month Discount Treasury Bond (DKJ).
It was also announced that existing constructions will also be revised by the end of September. The most important of these are the Premium Hungarian Government Securities (PMÁP), which are also securities with a variable interest rate tied to the rate of inflation. These latter currently offer a 6.6% interest rate, which, while still quite high among those currently available, is still way below the yearly inflation.
Expectations
Tying the new securities, BMÁP, to the Discount Treasury Bond is expected to make this asset more attractive, especially as the current performance of the latest D230823 Bond is 11.21%. This way BMÁP will be able to follow changes to the financial environment more easily than PMÁP.
While the Discount Treasury Bond originally targeted legal persons, recently it has become popular among natural persons thanks to its high interest rates. The new BMÁP tied to it already targets specifically natural persons, so at least equal popularity among them is forecasted.
As a result, the government expects a new influx of savings into government securities in Hungary. The Government Debt Management Agency also emphasized that these securities offer long-term protection against inflation. This is especially true if the investor can wait for their securities to mature, since in that case no personal income tax is to be paid on the interests.
Government securities in Hungary
Just like many other countries, Hungary also offers government securities as a form of savings and investment. They come with a promise of full repayment with an interest to top it, and they are considered conservative or safe investments, because the government backs them.
In Hungary, government securities are managed by the Hungarian State Treasury. These days the securities themselves are not paper based but managed online to offer better transparency (and fight money-laundering schemes) while providing comfortable digital access to your account and your savings. Any natural person can open an account, which must can be done in person or through the Ügyfélkapu electronic administration portal (some conditions may apply). After that, you can buy and sell government securities online, or even the official mobile app of the Treasury. Account management is free of charge.
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