Hungarian Bonds Snap 7-Day Slump, Stock Rise on China, Europe

Hungarian bonds snapped a seven-day selloff and stocks rose for a second day on manufacturing growth in China and speculation Europe may step up efforts to resolve its debt crisis.

Forint-denominated debt due February 2015 rallied, pushing the yield down 16 basis points to 8.07 percent from a 14-month high at 11:56 a.m. in Budapest. The BUX Index of equities advanced 1.8 percent, after plunging 11 percent in November.

Stocks in Europe and Asia climbed and the euro gained versus the dollar after manufacturing in China expanded at the fastest pace in seven months. Spanish 10-year government bonds snapped an 11-day decline after European Central Bank President Jean-Claude Trichet signaled that leaders may step up their response to the crisis that has led to a surge in borrowing costs of the continent’s most indebted members.

“The domestic market” in Hungary “will move more in line with international markets from now on following the severe underperformance of previous days,” Akos Herczenik, a stock analyst at Raiffeisen Bank in Budapest, wrote in a report today.

Hungarian shares and bonds last month had their biggest monthly rout since February 2009 as a plan to funnel assets from private pension funds, a row between the central bank and the government and speculation the country may have its credit ratings downgraded undermined investor confidence.

The forint, the world’s worst-performing currency last month, strengthened 0.4 percent to 279.51 per euro. The cost of insuring Hungary’s debt against non-payment with credit-default swaps fell to 370 basis points after rising to its highest since June yesterday, according to CMA data.

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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