Hungary’s cost of insuring against default on government debt gained for an eighth day and the forint dropped as Greece headed for new elections, raising concern that Europe’s debt crisis will escalate.
The country’s five-year credit-default swaps rose 3 basis points to 553 basis points by 5 p.m. in Budapest, the longest rising streak since November, according to data compiled by Bloomberg. The currency of Hungary, the European Union’s most indebted eastern member, retreated 0.4 percent to 293.4 per euro. That means a 1.5 percent loss in the past three days, the most in a similar period since March 29.
Demand for riskier assets dropped as Greek Pasok party leader Evangelos Venizelos said the country will hold elections, threatening to extend the political deadlock that left the country without a government since the last vote on May 6. Hungary’s economy contracted more than economists estimated in the first quarter, according to data from the Budapest-based statistics office today.
“Spillover of euro zone weakness to emerging markets is hitting Eastern Europe particularly hard,” Marc Chandler, New York-based global head of currency strategy at Brown Brothers Harriman, and colleagues wrote in a research report today.
Hungary hasn’t started talks on an aid deal of its own almost six months after requesting the assistance from the International Monetary Fund.
Hungary’s benchmark 10-year bonds dropped, lifting yields 4 basis points to 8.34 percent, the highest since April 24.
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