Forint Increases for the 3rd Straight Day

The major currency of Hungary, Forint has strengthened for the 3rd day on a row. Apart from that, the bonds surged ahead as Hungary increased more debt than what was planned initially. Forint has gone ahead by 0.8% and the same is currently at 293.68 per Euro. This is the highest value of the same in a week’s time. Incidentally, the Debt Management Agency sold Forint of total worth 55 billion in bonds which are due in 2016, 2018 and 2022. This is 17 billion Forint more than what was planned initially. The investors actually demanded more than 3 times as much debt as the amount sold, in comparison with a bid to cover ratio of 2.3 of a couple of weeks earlier.

The yields on the benchmark 10-year bonds of Hungary went down as it reached a 2-month high right on this week. Incidentally, the same has dropped by 9 basis points on today and is at 6.12% now. Forint weakened to a 6-week low on 11th June as there were concerns that the Federal Reserve will be cutting down the bond purchases. Such speculations caused reduction in demand for riskier assets. Investors are currently predicting that the Central Bank of Hungary will extend 10 months of interest rate cuts, which went down to the lowest figure in a year.

Andras Sovany, the Trader of ING Groep NV, stated that the auction went pretty well and this was a major relief for the market. Sovany added that there was big volatility in recent days and now things look much more stable with the bids reappearing.

The agency, after the initial auction, sold another 20 billion Forint through a non-competitive tender as well. The yields on the 3-year notes increased to 5.18% at the auctions held on today from its earlier value of 4.46% a couple of weeks earlier. The borrowing costs, on the other hand, increased on the other couple of maturities as well. However, the yields on the already existing 3-year notes went down by 6 basis points and the same is at 5.19% currently, after experiencing decline for 2 straight days.

Sovany commented that the Hungary Government is keeping no stones unturned to raise more debt. The auction has gone pretty well, however, there are concerns over the fact that Forint may pass the strongest levels experienced in 2013.