Hungary Retail Debt-Sale Plan Risks Draining Bank Deposits

Hungary’s plan to add euro bonds to household debt offerings while aid talks stall risks starving local banks of deposits and may prolong the second recession in four years, policy makers and investors in Budapest said.

The Cabinet will offer at least 60 billion forint ($272 million) worth of the three-year euro-denominated debt directly to citizens, paying euro-area inflation plus 2.5 percentage points, the state debt agency said on Oct. 11. That would amount to a yield of 5.2 percent, based on last year’s data, while the average rate on euro deposits for two years or more was 2.09 percent at the end of August, the central bank said.