The EUR/HUF pair moved up and down on Tuesday as sentiment turned to forint positive after Hungary’s government has announced that it would issue EUR 2 bn worth of eurobonds to finance motorway constructions and the NBP helped domestic bonds delivering a 25 bps rate cut. Regarding the eurobonds: although the amount announced is less than the EUR 2.5 billion worth of motorway bonds previously planned, the bonds should be issued at the end of the first quarter of 2006. Until yesterday, the market had had the information that only EUR 1.3 bn will be issued till the end of March.
Looking at the intra-day trading: the forint kept loosing ground till the early afternoon. The unit found support at the EUR/HUF 253.0 level and moved sideways till the release of the government eurobond issuance plan and an outcome of the Polish MPC. These events changed the sentiment in the domestic bond market and EUR/HUF plummeted to the 251 area already before the closing.
Today, the forint should mainly monitor core bond along with the Polish FX market. At the same time one can not rule out that some pre-positioning starts ahead tomorrow’s 3Y and 15Y bond auction. In such a case EUR/HUF could bounce back to the 252 zone.
(CSOB - Investment research)