Bloomberg News

Forint Caps Biggest Weekly Jump in 3 Months on IMF Talks Consent

April 27, 2012

The forint had the biggest weekly jump in three months as Hungary prepared to start talks on a bailout from the International Monetary Fund and the European Union.

Hungary’s currency appreciated 0.2 percent to 287.46 per euro by 4:05 p.m. in Budapest, extending its weekly gain to 3.3 percent, the best performance since the five days through Jan. 27. The forint appreciated 2.4 percent so far in April. The government’s benchmark 10-year bonds snapped three days of gains, lifting yields 1 basis point, or 0.01 percentage point, to 8.078 percent, compared with 9.017 percent on April 23.

Hungary received the European Commission’s approval to start negotiations on April 25, five months after Prime Minister Viktor Orban requested the aid, following wrangling on laws affecting the independence of the central bank and other institutions. Hungary wants “fast” talks with the IMF on a credit line to be used as a safety net in case of bond market turmoil in Europe, Orban said today on state-run MR1-Kossuth radio.

“We also view recent developments regarding the IMF/EU talks as strongly positive,” Zoltan Arokszallasi, an analyst at Erste Group Bank AG in Budapest, wrote in a research report today. “However, not all problems have been resolved.”

The IMF is ready to start negotiations with Hungary “as soon as adequate steps are taken to ensure central-bank independence,” according to a statement released in Washington late yesterday.

The cost of insuring against default on Hungary’s debt with credit-default swaps was little changed at 525 basis points, compared with 599 basis points on April 23, according to data compiled by Bloomberg. The benchmark BUX stock index fell 0.4 percent.

“We do not downplay the efforts that the Hungarian government has taken,” Daniel Hewitt, a London-based economist at Barclays Capital, and colleagues wrote in a research report today. “Formal loan negotiations could still be protracted.”

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

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


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