Forint, Hungary Bonds Extend Gains on Bets Selloff Was Overdone
The forint gained, poised for its biggest three-day rally in two months, and Hungarian sovereign bonds rose on speculation a selloff of the country’s assets last month was overdone.
The forint strengthened 0.7 percent to 277.85 per euro as of 5:02 p.m. in Budapest, bringing its gain since Nov. 29 to 2.3 percent, the biggest three-day advance since Oct. 5. Forint debt due in February 2015 rallied, pushing the yield 15 basis points lower to 7.962 percent.
Hungarian bonds and stocks in November had their largest monthly rout since February 2009, and the forint was the world’s worst-performing currency last month, as a plan to funnel assets from private pension funds, special taxes on some industries and speculation the country may have its credit ratings downgraded undermined investor confidence. The European Union’s credit crisis also weighed on assets of the bloc’s eastern members.
“Investors probably overreacted a little” in the earlier selloff of Hungarian assets, Nigel Rendell, senior emerging- market strategist at RBC Capital in London, said today. “Hungary’s budget deficit will still be amongst the lowest in the EU.”
European and U.S. stocks rose today after European Central Bank President Jean-Claude Trichet signaled policy makers will delay their withdrawal of stimulus measures and said record-low interest rates are “appropriate.”
The cost of protecting Hungarian government debt with credit-default swaps fell to 365 basis points today from 367 basis points yesterday. The price of credit swaps drops as investor perceptions of the borrower’s creditworthiness improve.
Hungary raised 51 billion forint ($242 million) in a bond sale today, 11 billion forint more than initially planned, according to auction results on the debt management agency’s Bloomberg page. Yields on the 2014, 2016 and 2020 notes rose from the last auction two weeks ago.
The EU’s most-indebted eastern member was the first EU nation to receive an International Monetary Fund-led bailout during the global credit crisis two years ago. Prime Minister Viktor Orban’s government is levying special taxes and funneling assets from private pensions to plug its budget gap.
Hungary’s government told its people Nov. 24 to move 3 trillion forint ($14 billion) of private-retirement fund assets to state control or lose their public pensions. The ultimatum is designed to help cut the fiscal deficit to less than 3 percent of gross domestic product next year.
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