EC gives blessing on Hungary’s talks on EUR 20 bln stand-by loan
Forint gains 2 percent, 10Y yields plummet by 86 bps
The Hungarian forint led CE currencies’ gains in a second consecutive session on Wednesday as the European Commission gave blessing to talks on stand-by loan for the country. According to the press release, the Commission “assessed that Hungary has taken sufficient action and commitments to enter into negotiations on precautionary balance of payment assistance”. As a result, the EUR/HUF cross rate fell by 2 percent and breached both 55 days and 200 days moving averages. Moreover, yield of 10Y government bond shrunk immediately by 86 basis points.
Regarding the commitments made by the government, it said it would withdraw proposals on expanding the central bank’s Monetary Council and would not appoint a third deputy governor before Governor Simor leave the central bank (March 2013). On the contrary, there was no agreement on the matter of salaries of central bankers. Apart from that, the issue of other controversial laws (data protection, retirement age of judges) remains unresolved, too.
Clearly, the negotiated political settlement is a desirable outcome from the perspective of sustainability of Hungary’s public finance. However, the Commission’s statement also said that it expected full implementation of all commitments that had been made before the actual negotiation would start.
HU 10Y yields plummeted after yesterday’s talks.
