Hungary’s Bond Yields Rise at Sale on Central Bank, Debt Crisis

Hungary’s borrowing costs rose at a bond auction on speculation the central bank and the government may use unconventional methods to boost the economy amid a deepening European debt crisis. The forint weakened.

The Debt Management Agency raised 60 billion forint ($254 million) in debt maturing in 2016, 2018, 2023 at today’s sale, 15 billion forint more than planned. The issuance included 15 billion forint in bonds due 2023 at an average yield of 6.44 percent, compared with a rate of 6.3 percent at the last auction two weeks ago. Financing costs also rose for the two other maturities. The forint slid 0.1 percent to 305.35 per euro by 12:47 p.m. in Budapest.

The currency slumped 3.3 percent this month and yields on longer-dated Hungarian debt advanced after Prime Minister Viktor Orban called for lower interest rates and pledged measures to help foreign-currency debtors. Former economy minister Gyorgy Matolcsy, who Orban picked this month to lead the central bank, said he will do more than his predecessor Andras Simor to support economic growth, while turmoil in Cyprus cut demand for riskier assets.

“Uncertainty regarding monetary policy and potential further measures on foreign currency loans, and to a lesser extent the impact from Cyprus lifted yields compared with two weeks ago,” Sandor Jobbagy, a Budapest-based analyst at CIB Bank Zrt., a unit of Intesa Sanpaolo SpA (ISP), wrote by e-mail on the auction.

The Magyar Nemzeti Bank, which reduced its benchmark rate in seven consecutive steps to 5.25 percent by last month, matching a record low, may trim an additional 25 basis points on March 26, according to 15 out of 19 analysts surveyed by Bloomberg. Three economists expect a 50 basis-point cut and one projects no change.

The debt agency sold three-month Treasury bills at an average yield of 4.79 percent on March 19, the lowest on record, as traders wagered on further rate cuts.

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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