Bloomberg News

Hungary Bonds Jump Most in 6 Weeks as Orban Talks Ease Aid Doubt

January 06, 2012

Jan. 6 (Bloomberg) -- Hungary’s bonds gained the most in six weeks and the forint rallied as Prime Minister Viktor Orban pledged to cooperate with central bank President Andras Simor after a dispute about the bank’s independence threatened the country’s bailout.

Ten-year government bonds in forint climbed the most since Nov. 28, cutting the yield 48 basis points to 9.917 percent, according to generic prices compiled by Bloomberg. Hungary’s currency strengthened 0.6 percent to 317.07 per euro by 11:16 a.m. in Budapest, paring this week’s loss to 0.7 percent after reaching a record low of 324.24 yesterday.

It’s in Hungary’s interest to get an International Monetary Fund agreement “as soon as possible” and there’s a “good chance” for swift talks, Orban told reporters in Budapest after meeting with Simor today. The government will hold daily consultations with the central bank and do “everything” to help the institution maintain economic stability, Orban said.

“Early forint action shows that markets are happy with this,” Simon Quijano-Evans, a London-based economist at ING Groep NV, wrote in a research report today. “It would be great to say that after 18 months of noise, we are seeing light at the end of the tunnel. All the more so since Orban and Simor are apparently meeting now.”

The cost of insuring Hungary’s debt through credit-default swaps reached an all-time high this week and the forint touched a record low versus the euro after aid negotiations with the IMF and EU broke off because of new laws that threaten to undermine the independence of the central bank.

The contracts fell to 695 basis points from 735 basis points yesterday, the highest close on record, data provider CMA said.

The benchmark BUX stock index rose 1.3 percent, the biggest gain in more than two weeks, as OTP Bank Nyrt., the country’s biggest lender, advanced 2.5 percent and Mol Nyrt., the biggest refiner, rose 1.5 percent.

The central bank law is “fully compatible” with EU regulations and the government will continue to respect the Magyar Nemzeti Bank’s independence, Economy Minister Gyorgy Matolcsy said in a letter sent to European Central Bank President Mario Draghi and published by the ministry yesterday.

--Editors: Peter Branton, Alan Purkiss

To contact the editor responsible for this story: Andras Gergely at agergely@bloomberg.net


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