Crisis on the Hungarian government bond markets in the winter of 2011–2012: was there a liquidity problem?
Crisis on the Hungarian government bond markets in the winter of 2011–2012: was there a liquidity problem?

Summary/Abstract: In this paper, I examine the Hungarian government bond market’s liquidity developments in recent years. First, I explain the importance of market liquidity for central bankers. I identify the most significant economic shocks and their impacts on the market by using various market indicators. The changes in the Hungarian pension system strongly affected the ownership structure of the government bond market, and raised the amount held by non-residents. A simple yield decomposition shows that while during the crisis of 2008–2009, the Hungarian sovereign bond yields were enhanced principally by the increase of the credit and liquidity risk premia, the crisis of 2011–2012 might increase credit risk premium, but increase liquidity risk premium less significantly.

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