Foreigners continued to sell HUF

Latest CenBank data confirm that foreigners continued to sell holdings of local currency Hungarian government bonds through August. This trend had started in February 2015, and by August, the non-resident share of total government securities had declined to 45.9%, the lowest since 2011, says Commerzbank. 

The domestic banks and households picked up the slack in demand from the sale by non-residents, and the outstanding stock of government securities was able to end up higher by end August as the government made successful issuances. 

Bond yields have come down sharply during September and early October and the HUF has strengthened from improving risk appetite, so this is not an immediate risk factor, but rather highlights the medium-term asset allocation patterns at a broader EM level, which could play a more significant role once the Fed has lifted off.