Hungarian bond yields jumped the most since January and the forint weakened to a six-week low on concern Hungary’s central bank may reduce rates further amid a slump in global demand for riskier assets.
The forint depreciated 0.5 percent to 300.61 per euro by 11:02 a.m. in Budapest, the weakest since April 29. Yields on Hungary’s benchmark 10-year bonds rose 36 basis points, or 0.36 percentage point, to 6.44 percent, the highest since March.
Hungary’s inflation rate was 1.8 percent in May, slower than the 1.9 percent forecast in a Bloomberg survey, and within 0.1 percentage point of the 39-year low reached in April, data from the statistics office in Budapest showed today. Emerging-market stocks tumbled to a nine-month low and currencies weakened amid concern the U.S. Federal Reserve will reduce stimulus.
“The overall inflation picture creates room for continuation of the ongoing rate reduction cycle,” Zoltan Arokszallasi and Orsolya Nyeste, Budapest-based economists at Erste Group Bank AG, wrote in a research report today. “However, recent changes on the market including sharp increases in bond yields and the weakening of the forint indicate that the end of rate cuts is not far off now.”
The Magyar Nemzeti Bank reduced its benchmark rate to a record 4.5 percent on May 28 in a 10th consecutive 25 basis point reduction. The easing cycle may reach the bottom at 4 percent in July, the Erste analysts wrote.
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