Bloomberg News

Hungary Yields Reach 2-Month Low Before Sale on IMF Aid Prospect

February 09, 2012

Feb. 8 (Bloomberg) -- Hungary’s bond yields fell to the lowest in more than two months before an auction tomorrow on speculation Prime Minister Viktor Orban will take steps needed to obtain an international bailout.

The state is offering 43 billion forint ($198 million) in notes maturing in 2015, 2017 and 2022 at tomorrow’s biweekly sale. A seventh day of gains in the 2017 securities cut yields 14 basis points, or 0.14 percentage point, to 8.245 percent at 5:10 p.m. in Budapest, the lowest since Nov. 17. The forint appreciated 0.2 percent to 289.74 per euro.

Orban is ready to compromise for the good of the country, he said in his annual state of the nation address in Budapest yesterday, echoing statements from the last month that he is ready to yield on most laws criticized by the European Union and the International Monetary Fund to reach a deal on aid.

“Bonds have extended their gradual rally,” Sandor Jobbagy, a Budapest-based fixed-income analyst at Intesa Sanpaolo SpA unit CIB Bank Zrt., said in a telephone interview late yesterday. “That’s partly because the market expects an agreement with the IMF.”

Hungary may start financial aid talks with the EU and IMF by late February or early March, Vilaggazdasag reported today, citing an EU official. The government is ready to accept a European Commission demand that an age-limit for judges should be scrapped to settle a dispute that has obstructed talks on the bailout agreement, news website Origo reported yesterday, citing a letter the government sent to the EU.

‘Conciliatory’

The debt agency, known as AKK, bought back 15 billion forint in bonds due this year at an auction today. The cost of insuring against default on Hungary’s debt with credit-default swaps fell to 545 basis points from 548 basis points yesterday, according to data provider CMA.

“It remains apparent that the government is striking a more conciliatory tone toward the international organizations,” Zoltan Arokszallasi, a fixed income analyst at Erste Group Bank AG in Budapest, wrote in an e-mailed report today, commenting on yesterday’s speech by Orban. “The most likely outcome is that the deal with the IMF and the EU on aid will be done in the first half of the second quarter.”

--Editors: Linda Shen, Ash Kumar

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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