(Updates with yields, IMF talks from seventh paragraph.)
Nov. 24 (Bloomberg) -- Hungary’s forint, the world’s worst performing currency in the past three months, and bonds may rebound after first quarter 2012, when demand for riskier, higher-yielding assets improves, Societe Generale SA said.
The French lender, which has been forecasting a weakening of the forint since September because of the government’s “misguided” policies, remains “bearish” on Hungary for the “short-term,” Benoit Anne, London-based head of emerging- market strategy, wrote in e-mailed responses to questions from Bloomberg today.
“At some point I can see a major turnaround in Hungary, just not now,” Anne said. “I call for the turnaround after the first quarter of next year.”
Hungary may raise interest rates to defend the forint as the outlook for the nation’s assets worsened on a plan allowing the repayment of foreign-currency home loans at below-market rates, Societe Generale said on Sept. 16. The forint may weaken to as low as 300 per euro, Anne also predicted on Sept. 21.
Hungary’s currency appreciated 0.2 percent to 310.03 against the European common currency by 2:32 p.m. in Budapest, paring its losses in the last three months to 12 percent.
“Hungary has been the primary target of contagion” from Europe’s debt crisis, Anne said, adding that Hungarian assets may rally as “contagion risks recede” next year, even without a shift in the government’s economic policies.
Hungary’s government last week sought assistance from the International Monetary Fund, reversing its policy of shunning aid, after the forint weakened to a record low against the euro and as Standard & Poor’s and Fitch Ratings warned the country may lose its investment-grade credit ranking.
The country’s benchmark 5-year bonds slumped for a second day, lifting the yield 20 basis points, or 0.2 percentage point, to 8.828 percent, the highest since July 2009.
Hungary’s bonds have weakened amid warnings from the government it would only accept IMF aid with conditions related to taxes and pensions. The bonds lost as much as 27 percent in the past three months in dollar terms, the second-worst performance worldwide after Greek debt, according to data compiled by Bloomberg.
“The terms and conditions of a potential agreement with the IMF and the EU to secure some kind of financial support are yet to be determined amid significant differences of views,” Gyorgy Barta, a Budapest-based economist at Intesa Sanpaolo SpA’s CIB Bank unit, and colleagues wrote in a research report today.
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