Hungary debt insurance cost drops to 18-month low as US fiscal pact boosts sentiment
Default insurance costs on Hungary's sovereign debt dropped to a 18-month low on Thursday, reflecting a favourable market fall-out from the last-minute deal in the US Congress to avoid the "fiscal cliff", a series of dramatic tax hikes and spending cuts pre-set by Congress in August, 2011, which analysts had feared would have driven the US economy back into recession.
According to CMA, a major CDS market data monitor in London, part of S&P Capital IQ, Hungary's five-year credit default swaps (CDS) traded around 260bps late in the session, a low not seen since July 2011.
Thursday's CDS pricings on Hungary's sovereign debt compare with record highs of over 750bps exactly a year ago.
A CDS contract valued at 260bps means that the cost to insure every EUR 10 million worth of sovereign FX bond exposure against default is now around EUR 260,000 a year for the benchmark five-year maturity, a fall of almost half a million EUR since the beginning of last year.
SUPPORT THE BUDAPEST BUSINESS JOURNAL
Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.