KBC on Hungary’s flattening yield curve

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Analysts from KBC Group, the owners of Hungary-based K&H Bank branches and frequent deniers of an exit from the country, have released some macroeconomic analysis while wondering “Is this the end of bearish flattening of the Hungarian fixed-income yield curve?”

KBC analysts note that said curve “has flattened substantially in the last week. The whole yield curve moved upward, but the weakening [of the forint against the euro] more greatly affected the short end of the curve than the long end of the curve.”

Among the findings and forecasts revealed in the report are the following.

Another base rate cut by the National Bank of Hungary (MNB) is not expected by KBC to emerge from the February 18 meeting.

● The MNB can be patient, according to the analysts, with the forint exchange rate at between HUF 310 and HUF 315 to the euro; the inflation target of 3% set by the central government should be met.

● In terms of stability, Hungary appears less sensitive to exterior conditions as compared to 2008 in particular.

● With relaxed market sentiment, good demand at the next Debt Management Agency (ÁKK) auction of treasury bills should be healthy.

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