Hungary’s five-year bond yields fell to the lowest in almost two months before an auction tomorrow after the International Monetary Fund said amendments to a central bank law address concerns blocking aid talks.
The government is offering 38 billion forint ($165 million) in notes maturing in 2015, 2017 and 2028 at the biweekly sale tomorrow, according to data from the Debt Management Agency on Bloomberg. The five-year yields fell four basis points, or 0.04 percentage point, to 7.93 percent, the lowest since May 3. The forint slid 0.2 percent to 286.78 per euro by 5:30 p.m. in Budapest, paring its gains this year to 9.9 percent.
The IMF is ready to start talks with Hungary on an aid package as soon as legislators approve the proposed changes, Managing Director Christine Lagarde said in a June 25 letter to the Hungarian government and central bank, a copy of which was distributed to reporters today. Negotiations have been held up for more than seven months since Prime Minister Viktor Orban requested the aid because of IMF and European Commission objections on the law.
“The market is reacting cautiously on fear there will be further complications after the earlier delays,” Andras Sovany, a Budapest-based trader at ING Groep NV, wrote in comments sent by e-mail, adding that bond yields fell by as much as seven basis points on Lagarde’s letter.
Hungary will pass the amendments by July 12 at the latest and talks can start in mid-July, Mihaly Varga, Hungary’s chief negotiator for an aid deal, told reporters in Budapest.
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