Bloomberg News

Hungary Boosts Bill Sale as Bids Hit 11-Month High on IMF Talks

July 17, 2012

Hungary raised its Treasury bill offering today after traders demanded the most debt in 11 months as the government started international aid talks.

Hungary sold 60 billion forint ($257 million) in three- month bills, 15 billion forint more than planned, after receiving bids for 177 billion forint, the most for that maturity since August 2011. The average yield was 6.89 percent, compared with 7.11 percent at the last sale of that maturity on July 10, according to results from the Debt Management Agency on Bloomberg. The forint appreciated 0.6 percent to 286.22 per euro by 4:23 p.m. in Budapest.

The government began talks on a bailout from the International Monetary Fund and the European Union today, eight months after requesting the aid, after resolving a dispute on legislation which threatened the independence of the central bank. Hungary wants to cooperate with the IMF as the country needs a credit line to help cut borrowing costs, Prime Minister Viktor Orban told reporters yesterday.

“Taking an IMF loan would have a favorable effect on interest costs,” Gergely Tardos and Levente Papa, Budapest- based analysts at OTP Bank Nyrt. (OTP), Hungary’s largest lender, wrote in a research report today.

The government’s benchmark notes maturing in 2022 weakened, lifting yields six basis points, or 0.06 percentage point, to 7.402 percent, after falling to the lowest since September yesterday. The BUX stock index gained 0.2 percent.

‘Tough’ Negotiations

Talks between the government, Thanos Arvanitis and Iryna Ivaschenko from the IMF and Barbara Kauffmann from the European Commission started today at the Justice Ministry in Budapest, state-run news service MTI reported.

The cost of insuring against default on Hungary’s debt with credit-default swaps dropped 12 basis points to 479 basis points, the lowest since October.

The bailout negotiations will be“tough” as the two sides disagree on the type of loan Hungary should get and the conditions attached, Benoit Anne, the London-based head of emerging-market strategy at Societe Generale SA, and colleagues wrote in a research report today.

“We hope that the negotiators arriving today like Budapest as we think they’ll be here a lot,” Levente Blaho and Adam Keszeg, Budapest-based analysts at Raiffeisen Bank International AG (RBI), wrote in an e-mailed report today.

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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