Hungary Raises More Debt Than Planned for 2nd Time as Borrowing Costs Fall

Hungary raised more debt than planned for the second time in two weeks and borrowing costs declined at today’s auction, boosting the government’s case that it can forego extending a bailout with the International Monetary Fund.

The government sold 50 billion forint ($236 million) of three-month Treasury bills, 5 billion forint more than planned, according to auction results on the debt management agency’s Bloomberg page. The average yield was 5.43 percent, compared with 5.46 percent at the previous auction on July 27. Investors bid for 118 billion forint of the bills, down from 133.3 billion at the previous sale.

Hungary, the first European Union member to obtain a bailout in 2008, can finance itself from the market and may no longer need emergency financing after the 20 billion-euro ($26 billion) IMF-led facility expires in October, Deputy Economy Minister Zoltan Csefalvay said in a July 29 interview.

“There’s a lot of liquidity in the system and the yield was favorable,” Gyorgy Cselenyi, a bonds trader at BNP Paribas in Budapest, said by telephone.

The Czech Republic paid 0.84 percent to raise the equivalent of $332 million in the sale of similar-maturity koruna debt on July 22. Poland raised the equivalent of $574 million, selling 52-week zloty bills at yield of 3.98 percent on July 26.

Hungary’s borrowing costs jumped to a four-month high of 5.47 percent at the sale of three-month bills two weeks ago after the IMF and EU ended talks with the government on July 17 without endorsing Prime Minister Viktor Orban’s fiscal plans. Yields have climbed from this year’s low of 4.8 percent as European governments struggled to contain budget deficits and Hungary roiled global markets by comparing the country with Greece.

‘Self-Rule’

Hungary wants to return to economic “self-rule” to jumpstart its economy, Orban said on July 23. Standard & Poor’s and Moody’s Investors Service last month said they may downgrade the country’s debt rating. The demand for Hungarian debt shows rating companies were “behind the curve” in threatening to lower the country’s credit grade, Csefalvay said.

The country would benefit from a new precautionary loan agreement with the IMF next year that would provide a safety net if market sentiment deteriorates, Central Bank President Andras Simor told investors on July 29.

“Our view is that a new agreement of a precautionary nature would be beneficial for Hungary,” Simor said. “It would form a sort of safety net, just in case the situation gets worse.”

For Related News and Information: Top regional news: TOP EEU <GO> For Hungarian bond stories: TNI HUNGARY GBN <GO> World bond markets: WB <GO> Developing economy market moves: EMMV <GO>

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