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Hungary Yields Fall 2nd Day Before Rate Meeting: Budapest Mover

Hungary’s benchmark bond yields retreated for a second day as investors bet the central bank will extend 11 months of interest-rate cuts today.

Yields on the nation’s 10-year bonds dropped four basis points, or 0.04 percentage point, to 5.91 percent by 10 a.m. in Budapest, bringing a two-day decrease to 9 basis points. The forint depreciated 0.1 percent to 294.65 per euro after strengthening 0.5 percent yesterday.

The Magyar Nemzeti Bank will lower the two-week rate by 25 basis points to a record 4 percent, its 12th consecutive quarter-point cut, according to all 21 economists in a Bloomberg survey. Governor Gyorgy Matolcsy will present a “guideline” for future interest-rate policy in his first press conference on the same day as the rate decision since taking over in March, the central bank said yesterday.

“Guidance on whether easing will continue after the expected cut today may have a serious impact on the forint and yields,” Zoltan Reczey and Gergely Palffy, Budapest-based analysts at Buda-Cash Brokerhaz Zrt., wrote in an e-mailed report dated today. “As Matolcsy said he would only speak on strategic decisions, today may be such an announcement on the rate outlook.”

The central bank sees further scope for cutting interest rates as long as there is no “bad news” on stimulus from the U.S. Federal Reserve and other central banks, Matolcsy said June 27. Deputies Adam Balog and Ferenc Gerhardt also said this month that they see more room for rate cuts.

Three-month forward-rate agreements, used to wager on interest rates, were little changed at 3.73 percent, 46 basis points below the Budapest Interbank Offered Rate.

“The central bank will cut twice more after today’s meeting to 3.5 percent, but any cuts from now on will be threatened by a rapid reversal if risk appetite wanes again,” Dan Bucsa, a London-based economist at UniCredit SpA (UCG), wrote in an e-mailed 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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