Measures to boost demand for government securities ‘extraordinarily effective’ in Hungary

Measures the government took in the summer to boost demand for government securities have “proven extraordinarily effective”, resulting in marked increases in the stock of debt held by both retail and institutional investors, the economic development ministry said on Tuesday.

Retail government securities are exempt from two taxes introduced in July, a 13 percent social contribution on investment returns and a 15 percent tax on capital gains, and this helped to generate direct and indirect demand for around 1,200 billion forints of securities, the ministry said.

Retail deposit stock fell by around 400 billion forints and demand reached 11,723 billion forints by the end of August. At the same time, households’ holdings of government securities climbed to 11,942 billion, exceeding deposit stock — an unprecedented development — the ministry said.

The ministry noted that banks were required from 1 October to start informing retail clients of the returns they might have seen on their savings if they had put them in government securities, rather than bank deposits, in the past year.