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Hungary’s Bonds Gain Before Bill Sale as Orban Seeks IMF Deal

Hungary's Prime Minister Viktor Orban
Hungary's Prime Minister Viktor Orban. Photographer: Balint Porneczi/Bloomberg

Hungary’s government bonds and the forint gained for a third day before a debt sale today on speculation Prime Minister Viktor Orban will abandon policies that stalled an international bailout.

Ten-year notes climbed, cutting yields 19 basis points to 9.89 percent, according to generic prices compiled by Bloomberg. The government will offer 40 billion forint ($163 million) in six-week Treasury bills at 11:30 a.m. in Budapest, according to data from the Debt Management Agency on Bloomberg. The forint rose 0.5 percent to 312.95 per euro at 9:42 a.m. in Budapest.

The forint fell to a record against the euro last week after the International Monetary Fund and the European Union broke off talks on Hungary’s bid for a bailout as Orban refused to withdraw new central bank regulation the institutions objected to. Hungary is ready to accept “any kind” of credit line that strengthens the country’s market financing, Orban said in an interview with state news service MTI yesterday.

“There’s been a 180-degree turn in communications, now the focus is on action,” Peter Karsai, a trader at Commerzbank AG in Budapest, wrote in an e-mail to clients today. “If we want the IMF safety net, the wish list of the IMF and the European Union needs to be implemented.”

Fitch Ratings lowered Hungary’s credit rating below investment grade on Jan. 6, following similar moves from Standard & Poor’s and Moody’s Investors Service last year, saying there remained doubts whether the government will submit to conditions for aid.

BUX Rally

The government sold 35 billion forint of one-year bills, 10 billion forint less than targeted, on Jan. 5, following several debt auctions in December at which the agency failed to reach the planned amount. The average yield rose to 9.96 percent, the highest since April 2009.

The benchmark BUX index of shares rose 2 percent today as OTP Bank Nyrt., Hungary’s biggest lender, gained 3.4 percent.

“While we see Hungarian assets as cheap, it may be too early to ‘buy on weakness’ given the stubbornness and inertia of Hungarian policymakers as well as the looming risk of another round of eurozone crises,” Peter Csaszar, a Warsaw-based equities analyst at KBC Securities.

German Chancellor Angela Merkel and French President Nicolas Sarkozy meet today for the first time in 2012 as they seek to craft a master plan for rescuing the euro over the next three months.

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