Bloomberg News

Hungarian Forint, Bonds Advance on IMF Talks, Bank Tax Change

June 13, 2012

The forint strengthened against the euro and government bonds gained after Hungary said it may start bailout talks as early as next month and a new tax may boost budget revenue more than initially expected.

Hungary’s currency added 0.9 percent to 295.27 per euro by 5:04 p.m. in Budapest. Rising bonds cut the yield on benchmark 2017 notes by five basis points to 8.48 percent as the cost of credit-default swaps insuring the debt fell to a four-week low.

Talks on financial aid with the International Monetary Fund and the European Union may start in July or August after the government amends the disputed central bank law and the EU decides on the country’s finances this month, Mihaly Varga, the minister in charge of bailout talks, told TV2 today.

“We expect that the amendments will satisfy the European Central Bank’s demands” and “expect a deal to be reached by September or October, before foreign debt repayments spike in the fourth quarter,” Michal Dybula, an emerging-market strategist with BNP Paribas SA in Warsaw, wrote in a report to clients today. “As a result of the deal, we would expect the risk premium on Hungarian assets to decline.”

Hungarian default swaps, which decline as perceptions of creditworthiness improve, fell eight basis points to 565 today, poised for the lowest close since May 16.

The European Union’s most-indebted eastern member may scrap an extraordinary bank tax from January, a year earlier than planned, as a new financial-transaction levy will yield “huge revenue, probably more than what we are counting in the current budget,” Premier Viktor Orban said in Vienna yesterday.

OTP Gains

“Since they are still deciding on the exact form of the tax, it is possible that revenues will be higher than forecast,” Daniel Hewitt, London-based economist for emerging Europe, the Middle East and Africa at Barclays Capital, wrote in e-mailed comments today. “This would be positive for the budget.”

OTP Bank Nyrt. (OTP), the biggest lender in Hungary, climbed 1.2 percent to 3,431 forint today, pushing the country’s main BUX equity index 0.4 percent higher.

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

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


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