The PEMÁP will end, the EMÁP will come
ÁKK announced last week that a new series is no longer advertised from the Premium Euro Hungarian State Paper (PEMÁP)instead announces a new euro-based retail government bond, called Euro Hungarian Government Bond (EMÁP).. The new paper will have quarterly interest payments tied to the 3-month Euribor, with a starting interest rate of 2.944% per annum, which investors can purchase from the Hungarian Treasury from March 17, 2023.
Today, the limit was increased by 75 million
ÁKK announced last week that the announced 2028/Y series of 400 million euros will soon run out, and a new series will no longer be issued under the same conditions.
Today, however, the debt manager increased this 400 million euro limit by 75 millionpresumably so that they can still accept all incoming orders.
However, it is important to remember that
the 2028/Y PEMÁP series can be purchased for the last time on March 16, 2023.
PEMAP or EMÁP, which is better?
The answer: it depends on what we expect. Apart from the fact that they offer savings in euros, the two schemes do not have much in common.
THE PEMA MAP an inflation-tracking government bond, the main features of which are:
- Expiring in 2028, a dematerialized government bond linked to euro zone inflation, with a variable interest rate, the base denomination of which is 1 euro.
- The amount of interest to be paid is the sum of the interest base and the interest premium. PEMÁP provides an interest premium of 0.25% above the average annual euro zone inflation of the year before the interest rate is established as an interest base.
- The PEMÁP interest cycle is in August, so until then it gives interest calculated with the inflation of the Eurozone 2021 (2.6% inflation in 2021 + 0.25% time-proportional part of the premium), and then it switches and ticks on with the inflation of the Eurozone 2022 ( 8.4% last year’s average annual inflation + 0.25% premium).
In comparison, the new Euro Hungarian State Paper (EMÁP)
- 3-year term, paying interest quarterly,
- provides a variable interest rate tied to the 3-month EURIBOR.
Which one is worth choosing if we want to save in euros is determined by our interest and inflation expectations.
Although it still sounds good that EMÁP gives 2.944% per annum, compared to PEMÁP’s current interest rate of 2.85%, let’s not forget that
PEMÁP’s interest rate turns in August, and from then on it already provides an interest rate of 8.65% for one year, in euros.
It is also true that the EURIBOR, which provides the EMÁP interest rate, has risen recently, but it is not expected to climb much higher, since according to analysts’ expectations, inflation will also slowly peak in the eurozone, and bond yields are also expected to decline from there. However, the EURIBOR, as a market interest rate, quickly follows the change in the interest rate environment, so this is reflected in the EMÁP interest rate.
Inflation in the Eurozone was still over 8% in January and analysts expect it to be at a similar level in February, it is quite possible that this year’s annual average inflation will still be high enough to From 2024, savers in PEMÁP should have another good year in terms of interest.
All in all, those who want to save in euros may want to buy Premium Euro Hungarian State Bonds in the next few days.
|The main characteristics of PEMÁP and EMÁP|
|PEMAPÁP (2028/Y)||EMÉP (2026/U)|
|Duration||6 years||3 years|
|Method of earning interest||Variable||Variable|
|Interest base||euro zone inflation||3-month EURIBOR|
|Interest premium||0.25%||there is none|
|Current rate of interest||2.85% p.a.||2.944% p.a.|
|Interest payment frequency||Annually||Quarterly|
|Distribution points||Hungarian State Treasury||Hungarian State Treasury|
|Source: ÁKK, Portfolio|
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