2. László Búzás, Managing Director ÁKK Rt. June 17, 2002 The Government Bond Market in Hungary 2002

3. The Debt Gross debt: HUF 7720 billion (2001) ~ 52,3% of GDP 79% Bonds and T-Bills – 21% Loans 70% HUF – 30% foreign currency denominated (foreign currency debt has been continuously decreasing since 1997 according to the debt management strategy) External debt: 44% 2002

4. EMU Market Conventions Market Harmonisation 2002 Government Debt/GDP

5. The Instruments Treasury Bills with 3,6 and 12 month maturity 3,5,10 and 15 year bonds Less bond lines - benchmarks Larger bonds series - liquidity retail paper: 1 and 2 year maturity No private placements and, as a rule, no loans 2002

6. Volume of Government Bonds Outstanding vs. Benchmark Issue Size (US$ billions) HUNGARY

7. 2002 Primary dealers 158 auctions in 2001(104 T-bill and 54 bond) Reverse auctions (11) Primary dealers: 8 banks, 5 brokerage firms 84% of issuance 90% of secondary market turnover

8. 2002 Ownership Structure of the Domestic Marketable Debt

9. 2002 Foreign Investors Foreign holding of HUF denominated debt: HUF 1272 billion An increase of approximately HUF 200 billion since December 2001 HUF 100 billion in T-bills 40% of marketable bonds Average life 3.2 years

10. 2002 EU-accession The real change comes with EMU-membership Best practices of the peer EMU-member countries Main goal: creation of a competitive, efficient and EMU-compatible government bond market Market development Market harmonisation

11. 2002 Price quotation Settlement circle Coupon payment frequency Yield calculation Business days (TARGET) Redenomination Market Harmonisation Market Conventions

12. 2002 Market Development Auction Rules and Procedures Abolition of the minimum price Amount  34% instead of  25% Exclusion of the off-market price Non-competitive bids Auction frequency

13. 2002 Product Innovation More standardized products Abolition of the 2 year T-bond and the 5 year FRN Lengthening of the yield-curve: Introduction of the 15 year bond Less bond series Larger bond series Issuance of T-bills for liquidity management purposes

14. Primary Dealers: The Future 2002 Liberalisation of capital movements Non-resident (remote) primary dealers New category of market makers (dedicated dealers, auction participants) Widening of the investor base

15. 2002 Secondary Market Change in the benchmark quotation Buy-back auctions Exchange auctions Repo facility Price quotation instead of yield quotation Increased requirements for price quotation (amount, spread) Multilateral international trading platform

16. More information www.akk.hu Thank you for your attention 2002