PURCHASE OF GOVERNMENT SECURITIES THROUGH UNICREDIT BANK
The popularity of government securities, which represent a dominant portion of the investment market, is derived from their liquidity and outstanding security.
Government securities are debt securities where the lender is the client who purchases the security and the borrower is the National Debt Management Centre on behalf of the Hungarian State. With government securities, the state undertakes a guarantee for the repayment of the principal and the payment of interest.
According to Hungarian legislation, short-term government securities (for no longer than one year) are called treasury bills, while government securities with a maturity in excess of one year are called government bonds. Discount treasury bills can be purchased below the nominal value and their nominal value is paid back upon maturity. Government bonds pay interest semi-annually or annually until maturity, and upon maturity the interest rate due for the last period is paid together with the nominal value.
Our bank quotes purchase and sales prices for government securities on a daily basis and so it provides continuous purchase and sales opportunities in respect of government securities that are available at the branches. Government securities are redeemable before their maturity at any time. In the case of redemption before maturity, the extent of the actually realised yield is affected by the difference between the sales and purchase yields and the changes in the market.
The yield of government securities and the extent of prices are inversely proportional with each other i.e. higher yields will result in lower prices.
Upon the purchase of government bonds, the client will pay the gross price of the security and will also receive the gross price upon its sales. In addition to the net price, the gross price includes the interest rate on a pro rata temporis basis (the so-called accrued interest) for the period that has passed since the previous interest payment after the bond. Naturally, it is always due to the holder who possessed the government security during this period.
Iit is important to know that the basic denomination of each government security is HUF 10,000 (except for BHGB - Bonus Hungarian Government Bonds - where it is HUF 1, and Premium Hungarian Government Bonds - where it is HUF 1 000), and so only a whole multiple of it can be sold or purchased at the given price. The condition for concluding government security transactions is the provision of collateral. Government securities are bought and purchased for our clients free of charges.
At the branch network of UniCredit Hungary we trade discount treasury bills (DTB) with terms of 3, 6, 12 months, interest-bearing treasury bills (IBTB) and long-term Hungarian government bonds (HGB) with a term of even 15 years, with fixed interest, as well as the Bónusz and Premium Hungarian Government Bond (BHGB, PHGB).
In addition, please also check the investment guideline from the European Securities and Markets Authority (ESMA).
Glossary of government securities
Price: It is defined as a percentage of the nominal value and represents the actual price payable for the given security.
Nominal value: A multiple of the basic denomination (HUF 1, HUF 1000. HUF 10,000) which is paid upon maturity.
Interest rate: It informs the investor of how many HUF it will get upon the interest payment. It is expressed as a percentage of the nominal value.
Yield: The measure that shows the growth that the investment will achieve until maturity, besides the price upon the purchase.