Forint Rises to 5-Week High on IMF Aid Progress: Budapest Mover

The forint strengthened to the highest in more than five weeks and government bonds rallied as Hungary’s government moved closer to starting talks on an international bailout.

Hungary’s currency appreciated 1.4 percent to 287.66 per euro by 4:33 p.m. in Budapest, the strongest since May 9, and extending its gain in the past three trading days to 2.9 percent. The government’s benchmark five-year bonds rallied, cutting yields 21 basis points or 0.21 percentage point, to 8.155 percent. The benchmark BUX stock index advanced 0.8 percent to 17,684.22 as OTP Bank Nyrt. (OTP), Hungary’s largest lender, jumped 2.7 percent.

The government and Magyar Nemzeti Bank President Andras Simor will probably send a joint letter today to the International Monetary Fund to present legal changes demanded by international lenders, Mihaly Varga, the country’s chief negotiator, said in an interview with HirTV late yesterday. Hungary’s dispute with the IMF and the European Commission over the independence of the central bank has held up aid talks for seven months.

“The current rally has been supported by the comments that the central bank law may be getting into a form that is acceptable for the European Union and the European Central Bank,” Sandor Jobbagy, a Budapest-based analyst at Intesa Sanpaolo SpA’s CIB Bank Zrt. unit, said in an interview today.

Hungary sold 50 billion forint ($219 million) in three- month Treasury bills, 5 billion forint more than planned, at an auction today. The average yield was 7.14 percent, down from 7.17 percent at the last sale of that maturity on June 12, according to results from the Debt Management Agency on Bloomberg.

Default Swaps

Demand for riskier assets rose as Greece moved toward forming a government and a Spanish debt sale met targets. The MSCI Emerging Markets Index gained 0.9 percent.

The cost of insuring against default on Hungary’s debt with credit-default swaps fell 17 basis points to 536 basis points, according to data compiled by Bloomberg.

“Following the initially small steps the Hungarian government now really seems to be about to start the negotiations about a precautionary credit line with its international backers,” Thu Lan Nguyen, a Frankfurt-based strategist at Commerzbank AG, wrote in a research report today.

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