1./ ÁKK (Government Debt Management Centre) held two auctions last week for 3-month T-bills and 1-year T-bills. The paper for 3-month offered were sold with high bid/cover ratio in amount HUF 10 billion up from the original plan. On the auction of 12-month papers, we saw a relatively lower bid/cover ratio. Yields on the average were slightly and more than 20 basis points down for the 3-month and 12-month T-bills, respectively.

Government securities in HUF terms possessed by foreign investors somewhat increased in the relevant week.

* Most recently at: 31 July 2010 (netted by NBH deposits). FX revaluation may, in itself, cause serious changes

2./ The yield curve showed a significant decline due largely to an additional demand emerged as a consequence of some HUF 300 billion of debt due to expire in the last week of this August. In the light of this, short-term and long-term yields were 10 to 15 bps and 35 to 45 bps, respectively, that week.

The 3-month and 10-year interest spread between forint and euro fell as well and to a greater extent on higher maturities in line with the composition of declining HUF yields. The premium of Hungarian government bond of FX denomination relative to the Bund insignificantly fell in the relevant week.

The CDS spread (a benchmark of Hungary’s sovereign credit risk) decreased slightly in the relevant week.

CDS spreads

3./ KESZ (Treasury Single Account) widened  the liquidity of the banking system in the relevant week. The banks started to lower their excessive reserves position on cumulative basis. The relevant week saw higher stock of two-week MNB bonds in the banks while their overnight deposits went lower.

The overnight rate stayed at the lower end of the interest rate corridor.

4./ In the relevant week, Hungarian forint exchange rate moved below HUF/EUR 280.

Thursday fixing was HUF/EUR 277.23.

U.S. dollar slightly gained against the euro while losing some 1.0 per cent against the Japanese yen in the relevant week.

5./ In July of 2010, the general government balance on cash basis showed a surplus of HUF 36.1 billion that month excluding local governments as a result of central government surplus at HUF 9.0 billion, social security funds’ deficit at HUF 4.6 billion and extrabudgetray funds’ surplus at HUF 31.7 billion. The year-to-date deficit  of general government until June-end was equal to HUF 997.5 billion or 114.6% of the annual deficit target excluding local governments. In the same period a year earlier, general government deficit made up 88.1 per cent of the related annual projection.

6./ The volume of building industry output was in June of 2010 19.7  per cent down from a year earlier both as adjusted and unadjusted for the working-day effect. As seasonally and for working-day effect adjusted, the output was 2.3 per cent higher from the previous month.

In the relevant month, the output of buildings and other structures constructed (the two major statistical groups) continued to go below the previous year’s. While construction of buildings in volume (with major weight) was lower by 19.0 per cent, other structures in volume dropped by 20.4 per cent from the same period of 2009.

Volume of new contracts showed an increase in June by 4.2 per cent. In the context, contracts of building construction went down by 3.1 per cent while other structures saw an increase of 12.4 per cent.

Thus, building enterprises’ month-end stock of orders in volume showed a growth by 6.0 percent from the level a year earlier.

7./ The agricultural producer prices were in June of 2010 down by 0.6 per cent from the level of the same period of 2009 as a result of plant and plant products’ prices nearly unchanged and  falling prices of livestock and animal products (by 1.5  per cent) on annual basis. Agricultural producer prices showed a rise by 0.2 per cent due to increasing prices of plants and plant products (by 2.0 per cent) and those falling on livestock and animal products (by 2.6 per cent) in January to June of 2010 from the same period of 2009.   

8./ In June of 2010, the number of the employed in the business sector rose by 2.2 per cent from the same period of 2009 showing some upturn as continued form the previous month while the public sector achieved staffing higher by 5.0 per cent due to the government-financed ”Pathway to Work” program both on annual basis excluding which the headcount in the sector would have been 0.4 per cent lower

As a result of these effects in total, the number of those employed in the national economy as a whole increased by 2.8 per cent. 

In June of 2010, monthly average of net earnings went up by 7.5 per cent on a national economy-wide basis. In the context, business sector and public sector increased monthly average net earnings by 8.4 per cent and 5.8 per cent.

In June of 2010, average gross earnings showed a rise  of 0.5 per cent in the national economy as a whole including business sector with earnings growth at 2.9 per cent and public sector with a fall at 4.5 per cent.

Real earnings on national economy-wide basis increased by 3.7 per cent with a rate of inflation at 5.7 per cent.