Bloomberg News

Hungary Default Swaps Fall Most in Month as Forint Gains on IMF

June 06, 2012

The cost of protecting Hungary’s debt against default fell the most in more than a month and the forint gained as a vote was set for next week on central bank law changes needed to start aid talks.

Hungary’s credit-default swaps fell 21 basis points to 609 basis points, the biggest decline since May 1. The forint appreciated 0.9 percent to 299.95 per euro by 2:33 p.m. in Budapest, strengthening for a third day. The benchmark BUX stock index rallied 1.7 percent, heading for the highest in more than two weeks, as Mol Nyrt. (MOL), Hungary’s biggest refiner, jumped 2.6 percent.

The vote on the central bank law, postponed from June 4 to allow time for changes requested by the International Monetary Fund and the European Union, is slated for parliament’s June 11- 13 session, according to an agenda posted on its website. Prime Minister Viktor Orban’s government, which requested the aid more than six months ago, is willing to compromise on the law to help start the talks, Nepszabadsag reported today, citing unidentified government and ruling-party officials.

“If the central bank law completely met the international organizations’ expectations, then the aid talks may even start in the first half of the year,” Peter Karsai, a Budapest-based trader at Commerzbank AG, wrote in an e-mail today.

Data showing Australia’s economy grew at twice the rate economists estimated improved global sentiment and lifted the forint, Karsai added.

The government’s benchmark 10-year forint-denominated notes advanced, cutting yields 16 basis points, or 0.16 percentage point, to 8.781 percent.

‘More Conciliatory’

The government’s “more conciliatory” attitude on the IMF and EU request to guarantee the central bank’s independence showed a “breakthrough is now possible” in getting the bailout talks started, Daniel Hewitt, a London-based economist at Barclays Plc, wrote in an e-mailed report today.

Hungary won’t “necessarily” need to sell foreign-currency debt before obtaining a credit line from the IMF, Laszlo Andras Borbely, deputy chief executive officer of the Debt Management Agency, said in an online interview on news website portfolio.hu today. Funding reserves and the structure of Hungary’s debt maturities allow the government to delay a Eurobond sale until the autumn, Borbely said.

The euro-denominated bonds maturing in 2019 sold in Hungary’s last foreign-currency issuance May 2011 rallied, cutting yields 17 basis points to 8.459 percent.

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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