Forint Gains for Fourth Day to Five-Month High as Bonds Climb

The forint appreciated for a fourth day to the strongest close since September and bonds rallied as global appetite for riskier assets increased and Hungary moved closer to obtaining international aid.

The currency of Hungary, the European Union’s most indebted eastern member, advanced 1 percent to 287.15 per euro as of 4:38 p.m. in Budapest, the strongest on a closing basis since Sept. 27. Gains in the government’s benchmark 10-year bonds cut yields six basis points, or 0.06 percentage point, to 8.478 percent.

Hungary accepted the majority of the European Commission’s demands on three infringement procedures against the country which have blocked talks for European Union and International Monetary Fund assistance, Foreign Minister Janos Martonyi said in a HirTV interview late yesterday. The MSCI Emerging Market Index jumped as much as 0.6 percent after China cut banks’ reserve requirements and ahead of a meeting of euro-area finance ministers to discuss a Greek bailout.

“The forint may sustain its strong performance because of the potential positive turn in sentiment on the Greek solution,” Levente Blaho and Adam Keszeg, Budapest-based analysts at Raiffeisen Bank International AG, wrote in a research report today.

The forint has rallied more than 11 percent, the biggest gains worldwide, since Prime Minister Viktor Orban said Jan. 5 he was ready to discuss steps needed to obtain a “quick” bailout after a dispute with the EU and IMF on areas including monetary-policy independence.

‘Constructive Recommendations’

Hungary made “constructive recommendations” on issues, including the early retirement of judges, Martonyi said in yesterday’s interview. The government suggested allowing judges to continue working past the new general retirement age of 62 years on a case by case basis, Martonyi said, following a dispute with the EU on whether an age limit was discriminatory.

The cost of insuring against default on Hungary’s debt with credit-default swaps was little changed at 552 basis points according to data provider CMA.

Hungary may obtain IMF aid in June or later as the government needs to bridge “deep differences” with the organization on fiscal policy, Daniel Hewitt and Piotr Chwiejczak, London-based economists at Barclays Capital, wrote in a report today after visiting Budapest.

“With a bumpy road ahead in the IMF negotiations and credit being the asset class likely to be hit first and hardest if Hungary runs into serious external financing problems without IMF disbursements, we maintain our ‘underweight’ stance on Hungary credit at this stage,” the economists wrote.

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

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

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