Hungary’s bond yields snapped their steepest four-day slide in almost two months and the forint retreated from a week-high as a technical indicator suggested the decline was overdone.
Yields on 10-year debt rose two basis points or 0.02 percentage points to 6.47 percent. The 43 basis-point plunge in yields was the most since the four days through Oct. 16, pushing the notes’ 14-day relative strength index to 23 yesterday, below the 30 level which some analysts consider as oversold. The RSI climbed to 25 today. The forint depreciated 0.1 percent to 282.39 per euro by 1:06 p.m. in Budapest.
Hungary’s borrowing costs plummeted yesterday as data showed the inflation rate dropped to an 11-month low and global demand for riskier assets grew, giving the central bank more scope to cut interest rates. Foreign investors held 5 trillion forint ($23 billion) in local currency debt as of yesterday, 0.1 percent shy of a record reached at the end of last week, according to data from the Debt Management Agency.
The jump in foreign ownership of Hungarian debt creates a risk in case global appetite for higher-yielding assets decreases, Zoltan Arokszallasi, a Budapest-based fixed-income analyst at Erste Group Bank AG, wrote in a research report today. Erste sees the 10-year yield rebounding to 6.5 percent next year, he added.
Hungary’s inflation rate fell to 5.2 percent in November, the lowest since December 2011 and compared with the central bank’s 3 percent target, statistical data showed yesterday. The Magyar Nemzeti Bank’s benchmark interest rate is 6 percent, the European Union’s highest, after policy makers cut it by a cumulative one percentage point in the past four months citing improvement in investor sentiment.
Investor confidence in Germany, Hungary’s biggest export market, jumped to a seven-month high, data showed yesterday.