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Hungary buys back USD 1 bln of dollar bonds

Hungary has bought back USD 1 billion of high-yield FX bonds, saving the state HUF 42.7 bln in debt servicing expenditures, Finance Minister Mihály Varga told state news wire MTI.

Those savings will be booked until 2024 and include HUF 16.5 bln in 2020, Varga said.

He said that another FX bond issue was not necessary to refinance the debt as the bonds had been repurchased with existing forint and FX liquidity.

Hungaryʼs Government Debt Management Agency (ÁKK) earlier announced it would repurchase the USD 1 bln of dollar bonds between January 21 and 27.

Varga noted that the credit default swap (CDS) spread on Hungaryʼs sovereign debt is now under 50 bp, close to the CDS spread for Polish bonds. In 2010, the CDS spread on Hungarian government securities stood around 400 bp, he added.

A CDS contract valued at 50 bp means that the cost to insure every EUR 10 million worth of sovereign FX bond exposure against default is around EUR 50,000 a year for the benchmark five-year maturity.