Bloomberg News

Hungary Rejects All Bids at 12-Month Treasury Bill Auction

October 27, 2011

(Updates with analyst comment from fourth paragraph.)

Oct. 27 (Bloomberg) -- Hungary rejected all bids at an auction of 12-month Treasury bills, a day after Economy Minister Gyorgy Matolcsy was cited as saying the country faced the risk of a credit-rating cut to below investment grade.

The government, which sought to raise 40 billion forint ($186 million), sold no bills after receiving 22.8 billion forint in bids, auction results on the state debt management agency’s Bloomberg page showed. The amount of debt was the least sought by investors at auctions of that maturity since at least 1999, according to Bloomberg data.

Hungary is under a “real threat” that one of the rating companies will cut its sovereign-credit grade to junk, Matolcsy said in an interview with Heti Valasz published today, a copy of which was obtained by Bloomberg News yesterday. The country has the lowest investment-grade ranking from Standard & Poor’s, Fitch Ratings and Moody’s Investors Service.

A cut to below investment grade is priced in by the market, Daniel Lenz, Frankfurt-based chief emerging market strategist at DZ Bank AG, wrote in an e-mailed response to questions from Bloomberg. "Still, cash-wise a downgrade would still pull money out of the country."

The debt agency sold a planned 5 billion forint of floating-rate bonds as bids dropped to 7.2 billion forint from 12.7 billion forint at the last auction on Sept. 29, the data showed.

The forint weakened 0.1 percent to 302.05 per euro by 3:10 p.m. in Budapest, after declining to as low as 302.73 yesterday, the weakest since April 2009.

--Editors: Linda Shen, Stephen Kirkland

To contact the reporters on this story: Andras Gergely in Budapest at agergely@bloomberg.net; Edith Balazs in Budapest at ebalazs1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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