Hungary launched USD1.5bn in 10-year Eurobonds, which carry 4.75% fixed coupon rate. In December last year, the State Debt Management Agency (AKK) mandated Morgan Stanley and Deutsche Bank to co-lead the offer. The issue price of the bond was 99.669%, which translates to 4.792% yield. In turn, the latter is 57 bps higher than the US Treasury bond benchmark and 0.19pps above USD mid-swaps.
The bond expires on Feb 3, 2015. Noteworthy, the launched amount is three times higher than the USD500mn volume that AKK announced in December. The increase was explained by heavy interest among foreign investors. When announcing its 2005 debt financing plans, AKK said that it planned to issue total of EUR 3.5bn on international markets, but this figure included only USD 500mn January issuance. So far it is unclear how the change will affect the 2005 plans.
The large Eurobond amount marks the beginning of change in debt financing strategy of Hungary, according to which international placements will be also used to finance the budget deficit for the ongoing year. Until now, foreign issues were used only for refinancing of expiries. According to the original plans of AKK, gross international issues in 2005 will exceed expiries by EUR 1.9bn, while forint denominated placements are expected to drop by some 40% y/y to HUF 464bn (EUR 1.89bn).