Bloomberg News

Hungary Sells Target Amount of Debt at 2 1/2 Year-High Yield

January 09, 2012

(Updates with analyst comment in fourth paragraph.)

Jan. 9 (Bloomberg) -- Hungary’s bill yields reached the highest since June 2009 as Prime Minister Viktor Orban’s Cabinet worked to restart talks on an international bailout that would help the country maintain access to market financing.

The state raised 40 billion forint ($163 million), the full amount targeted, in six-week Treasury bills, according to data from the Debt Management Agency on Bloomberg. The average yield was 7.77 percent, compared with 7.24 percent at the last sale of that maturity on Nov. 28. The forint appreciated 0.1 percent to 314.0 per euro at 11:34 a.m. in Budapest.

The forint fell to a record against the euro last week after the International Monetary Fund and the European Union broke off talks on Hungary’s bid for a bailout as Orban refused to withdraw new central bank regulation the institutions objected to. Hungary is ready to accept “any kind” of credit line that strengthens the country’s market financing, Orban said in an interview with state news service MTI yesterday.

“Recent comments from the cabinet indicate that the government aims for a quick agreement with the IMF, which is positive, albeit the uncertainties are not removed completely in our view,” Zoltan Arokszallasi, a fixed-income analyst at Erste Group Bank AG in Budapest, wrote in a research report today.

Fitch Ratings lowered Hungary’s credit rating below investment grade on Jan. 6, following similar moves from Standard & Poor’s and Moody’s Investors Service last year, saying there remained doubts whether the government will submit to conditions for aid.

The government sold 35 billion forint of one-year bills, 10 billion forint less than targeted, on Jan. 5, following several debt auctions in December at which the agency failed to reach the planned amount. The average yield rose to 9.96 percent, the highest since April 2009.

“There’s been a 180-degree turn in communications, now the focus is on action,” Peter Karsai, a trader at Commerzbank AG in Budapest, wrote in an e-mail to clients today. “If we want the IMF safety net, the wish list of the IMF and the European Union needs to be implemented.”

--Editors: Peter Branton, Gavin Serkin

To contact the reporter on this story: Andras Gergely in Budapest at agergely@bloomberg.net

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


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