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Hungary default insurance costs reach record high

Default insurance costs on Hungary’s sovereign debt surged to a record high on Friday after a downgrade of the country’s sovereign rating to "junk" by Moody’s late Thursday.

According to CMA DataVision, a major CDS market data monitor in London, Hungary’s five-year credit default swaps (CDS) traded around 644bp late in the afternoon on Friday, rising from 603.8bp after the previous close.

A CDS contract valued at 644bp means that the cost to insure every €10m worth of bond exposure against default is €644,000 a year for the benchmark five-year horizon.

The previous CDS peak for Hungary, of over 630bp, came in March 2009, at the height of the global financial crisis.

CMA’s data show CDS pricing for German debt rose to near 122bp, a record high for the country.