An inflation-linked bond designed for Hungarians who want to make pension savings could be launched in the autumn, Finance Ministry deputy state secretary László Balogh said at a conference organised by news portal Napi.hu. Balogh said details of the bond would be made public in the coming months. Plans to launch the bond were initially announced last autumn. Balogh said demand for the pension bond was expected to ramp up gradually, over a period of years, while another bond slated for launch in June would become popular immediately.
The other bond targeted at retail investors will pay a graduated rate of 3.5%-6% over five years. The coupon on the five-year bond will be 3.5% at the end of six months and 4% at the end of twelve months. Half a percentage point will be added to the coupon each year after that, meaning the bond pays 6% in the final year of its term. The yield on the bond will be tax exempt.
Balogh said a number of existing retail government securities could be phased out after the new products are introduced, but the inflation-linked Premium Hungarian Government Securities (PMAP) would remain in the mix. The PMAP pays 1.7% over the rate of inflation, or 4.5% at present.
Balogh said the government expects the National Bank of Hungary (NBH) to achieve its 3% +/- 1pp inflation target in the coming five years.
He said the introduction of the new securities was expected to boost the financial savvy of Hungarians and increase their propensity to save for the future. Currently more than half of household savings are in investments maturing in below one year, he added.