Hungary’s three-year bond yields fell for a second day and the forint weakened after three central bank policy makers said they see further room to reduce interest rates after three consecutive months of cuts.
Yields on the benchmark bonds maturing in 2015 dropped eight basis points, or 0.08 percentage point, to 6.159 percent by 4:59 p.m. in Budapest. Hungary’s currency depreciated 0.1 percent to 282.42 per euro.
The inflation outlook and the improvement in risk assessment allow the Magyar Nemzeti Bank to lower the 6.25 percent benchmark rate, central bankers Andrea Bartfai-Mager, Ferenc Gerhardt and Gyorgy Kocziszky said in a joint interview at their office in Budapest today. Easing must be cautious and gradual, Bartfai-Mager said. The country’s “equilibrium interest rate” is 4.5 percent to 5 percent, Gerhardt said.
The further easing expected from the central bank is “good for fixed income, but not so sure for the forint,” Benoit Anne, London-based head of emerging-markets strategy at Societe Generale SA, wrote in e-mailed comments.
Central bank projections are based on the assumption that Hungary will obtain a credit line from the International Monetary Fund and the European Union, the policy makers said.
Emerging market investors don’t expect Hungary to secure an aid deal with the IMF within three months, a Societe Generale survey of 61 hedge funds and “real money” investors showed.