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Hungary Bond Yields Drop to 2 1/2 Year Low as Inflation Slows

Hungary’s three-year bond yields declined to the lowest in 2 1/2 years as the inflation rate dropped to an 11-month low, giving the central bank more room to continue cutting interest rates.

The yields dropped four basis points to 5.78 percent, the lowest since the end of May 2010. The forint appreciated 0.3 percent to 282.55 per euro by 10:11 a.m. in Budapest.

The inflation rate fell to 5.2 percent in November, the lowest since December, from 6 percent in October, compared with the central bank’s 3 percent target, the statistics office in Budapest said today. The median estimate of 18 economists in a Bloomberg survey was for 5.5 percent. The Magyar Nemzeti Bank’s benchmark rate is 6 percent, still the EU’s highest, after policy makers reduced it by a cumulative one percentage point in the past four months.

“The slowing inflation path may support the continuation of central bank rate cuts,” Zoltan Reczey and Gergely Palffy, analysts at Buda-Cash Brokerhaz Zrt., 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: Wojciech Moskwa at wmoskwa@bloomberg.net

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