The forint strengthened for a third day and bonds surged after Hungary raised more debt than planned.
The currency appreciated 0.8 percent to 293.68 per euro by 3:40 p.m. in Budapest, the highest in more than a week. The Debt Management Agency sold 55 billion forint ($249 million) in bonds due in 2016, 2018 and 2022 -- 17 billion forint more than planned. Investors demanded more than three times as much debt as the amount sold, compared with a bid-to-cover ratio of 2.3 two weeks ago, data from the agency on Bloomberg show.
Yields on Hungary’s benchmark 10-year bonds fell after reaching a two-month high this week, dropping nine basis points to 6.12 percent today. The forint weakened to a six-week low on June 11 as concern the U.S. Federal Reserve may cut bond purchases reduced demand for riskier assets. Investor bets that Hungary’s central bank will extend 10 months of interest rate cuts fell to the lowest in a year.
“The auction went well, which was a relief for the market,” Andras Sovany, a Budapest-based trader at ING Groep NV, wrote by e-mail. “After the big volatility in recent days it was a good sign that bids reappeared.”
The agency sold an additional 20 billion forint in a later, non-competitive tender. Yields on the three-year notes jumped to 5.18 percent at today’s auction from 4.46 percent two weeks ago and borrowing costs also rose on the other two maturities.
Yields on the existing three-year notes fell six basis points, or 0.06 percentage point, to 5.19 percent in the second day of declines.
The government is “using every opportunity to raise more debt,” Sovany said. “This auction went well, but there is concern that we may be past the strongest levels this year. There are signs of a global shift away from emerging markets and from bonds to equities.”
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