Hungary’s Bonds Slump as Inflation Rate Rises to 21-Month High

Hungary’s government bonds weakened after the country’s inflation rate jumped to the highest in 21 months in January.

The slump in the notes maturing in 2014 raised yields 9 basis points, or 0.09 percentage points, to 8.432 percent by 5 p.m. in Budapest. Consumer prices rose 5.5 percent from a year earlier, the most since April 2010, after a 4.1 percent increase in December, the statistics office in Budapest said today. The median estimate of 18 analysts surveyed by Bloomberg News was 5 percent.

The Magyar Nemzeti Bank unexpectedly held the benchmark interest rate at 7 percent last month. President Andras Simor said the vote was “close” and that the main rate may need to be lifted further if the country’s risk assessment and inflation outlook deteriorate.

“Monetary policy statements will reconfirm the Monetary Council’s readiness to hike rates further if inflation trends continue to accelerate,” Eszter Gargyan, a Budapest-based economist at Citigroup Inc., wrote in an e-mailed report on the inflation data. “But risk premiums are likely to remain the key inputs to rate decisions in the short term.”

The forint depreciated 0.2 percent to 291.15 per euro.

To contact the reporter on this story: Andras Gergely at agergely@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.