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Hungary among the top CDS performers in Q1, says City

Hungary was among the top ten performers in terms of improving sovereign debt market insurance costs in the first quarter of 2011, a major London-based data provider said on Monday.

A quarterly report released by Markit showed that credit default insurance spreads (CDS) on Hungary's sovereign debt had tightened 32.2% over the first three months of this year to 263bps, placing Hungary on the list of the top ten outperformers, alongside countries like Austria, Germany and Chile.

Austria that saw its CDS spreads drop by more than 40pc is at the top of the list. Markit said that Austrian banks are heavily exposed to central and eastern Europe, "particularly Austria's neighbor and another constituent of the best performing 10, Hungary". Hungary's credit risk "has been perceived to have improved, and this in turn has lightened the bad debt outlook for Austria's banks", Markit said.

A CDS contract valued at 263bps means that the cost to insure every €10 million worth of bond exposure against default is €263,000 a year for the benchmark five-year horizon. Hungary's current CDS prices suggest a significantly better market perception of default risk than that of some eurozone countries, especially Greece whose CDS spreads have been hovering above 1,000bps, or a million euros for every 10 million euros of outstanding Greek debt, for weeks.