Hungary issued international bonds worth USD 3.25 billion on Tuesday, which were nearly four times oversubscribed as they have received bids worth USD 12 billion.
Hungary’s currency has strengthened as a result of the issuance. Thanks to the successful issue, this year's international bond programme has been more than half completed, András László Borbély, deputy head of the Government’s Debt Management Agency (ÁKK), said. László András Borbély pointed out that out of the bonds, USD 2 billion of 10-year and USD 1.25 billion of 5-year notes were issued.The ten-year bonds, bearing interest of 5.4 per cent, attracted most investor attention.
He said the issue was converted into Euros worth 2.5 billion, and according to the issuance plan, foreign currency debt worth EUR 5.1 billion will expire in 2013, the majority of which is going to be repaid through the issuing of Eurobonds worth EUR 4-4.5 billion. The ÁKK opted for a dollar denominated issue due to demand by US investment funds for higher risk, higher yield papers, he added. He also stated that representatives of the ÁKK and the Ministry for National Economy had participated in a total of 38 sessions aiming at preparing the issuances within the framework of a seven-day series of meetings with investors.
Nicholas Spiro of Spiro Sovereign Strategy stated that the exceptionally favourable market conditions were one of the major factors in the strong demand shown by investors. The other factor was that sensitivity regarding Hungary's talks with the IMF on financial aid had softened significantly before the dollar issue. This was indicated by the fact that Hungary was also able to draw in considerable resources with its forint-denominated government security issues, and that the foreign ownership ratio on the bonds market is one of the highest among emerging markets, he said. Foreign Minister János Martonyi also spoke about the recent bond issuance in an interview and mentioned that despite certain credit rating agencies’ negative forecasts, Hungary was able to issue such a high volume of bonds and investors are more than willing to purchase them with such a yield. This demonstrates that the rating agencies are not necessarily accurate with regard to deteriorating investor confidence.