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Cost of insuring Hungarian debt climbs to 1.5-year high

The cost of insuring Hungarian state debt rose on markets in London on Friday to levels not seen since the spring of 2010.

CMA DataVision said that the benchmark 5-year mid-spread of Hungary's credit default swaps contracts (CDS) was a little over 400bp in trade in London on Friday, up from 370.5bp late Thursday.

A CDS contract valued at 400bp means that the cost to insure every €10 million worth of bond exposure against default is €400,000 a year for the benchmark five-year horizon.

One month earlier, Hungary's CDS mid-spread was about 265bp.

In a front-page story published on Friday morning, broadsheet Népszabadság said Hungary's indebted local councils need a three-year moratorium on principal repayments on their foreign currency-denominated debt because of the firming Swiss franc, citing the head of local council alliance TOOSZ.

On Wednesday, the mid-spread of Hungary's CDS contracts also rose after one of the country's other local council associations said it was asking the prime minister to intervene to get a one-year moratorium on repayment of principal on foreign currency-denominated debt.