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Hungary default insurance costs fall after IMF-EU talks move closer

History

The cost of insuring Hungary's sovereign debt against default fell further on markets in London on Thursday, a day after the European Commission said talks with Hungary on precautionary financial assistance the country is seeking could start.

According to Markit Financial Information Services, a major CDS market data monitor in London, Hungary's five-year credit default swaps started trade Thursday at 528bp, down a sharp 40bp from the previous close.

The price of Hungary's five-year CDSs fell from around 600bp early in the week after Prime Minister Viktor Orbán said that obstacles to talks with the European Union and the International Monetary Fund on the precautionary financing had been "essentially removed" after a meeting with EC President Jose Manuel Barroso in Brussels on Tuesday.

A CDS contract valued at 528bp means that the cost to insure every €10 million worth of bond exposure against default is €528,000 a year for the benchmark five-year horizon.

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