Hungary default insurance cost drops to fresh year-low

Budapest, October 12 (MTI) – The cost of insuring Hungary’s sovereign debt against default fell under 300 basis points on markets in London on Friday, reaching a new low for the year as optimism was boosted by the government’s fiscal adjustment programme unveiled a week earlier and market expectations for an agreement with the IMF/EU.

According to Markit, a big CDS market data monitor in London, Hungary’s five-year credit default swaps (CDS) fell 23bp to around 298bp on Friday, down 70bp from a week earlier.


A CDS contract valued at 298bp means that the cost to insure every 10 million euros worth of bond exposure against default is 298,000 euros a year for the benchmark five-year horizon.


Hungary’s CDS spreads stood over 750bp in the first week of this year.


The forint firmed on Friday morning’s interbank market, trading at 281.13 to the euro compared to a Thursday-evening rate of 281.22.


Dealers attribute the forint’s strengthening to positive regional market-factors as well as the increasingly widespread conclusion that Hungary’s government is drawing close to an agreement with the International Monetary Fund regarding a financial-support package.


The forint also strengthened to the Swiss franc and the US dollar on Friday morning, trading at 232.44 to the CHF and 216.74 to the USD at 10:30 a.m., compared to Thursday-evening rates of 232.69 and 217.44, respectively.


Prime Minister Viktor Orban told public Kossuth radio on Friday that Hungary was not far from reaching a “good agreement” with the International Monetary Fund on financial assistance.

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