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Forint down to 2.5-year low after S&P rating cut

The Hungarian forint fell to a two-and-a-half year low of Ft 271.62 against the euro, and 10-year government bonds had their biggest drop since January, after Standard & Poor's lowered the country's credit rating. Hungary's long-term rating was cut one step to BBB+ from A-, the third-lowest investment grade, S&P said in a statement today. The outlook is negative, according to the statement. "Markets were already very nervous given recent emerging market sentiment," said Lars Christensen, an emerging markets strategist at Danske Bank A/S in Copenhagen. "There will be contagion from this to the rest of the region, there is no doubt."  The yield on the benchmark 10-year Hungarian bond rose 14 basis points to 7.21%, the most since Jan. 26. The price, which moves inversely to the yield, fell 0.85, or Ft 85 per 10,000 face amount, to 88.38.  (Bloomberg, Nb 1, NG 1)