July 5th, 2012

Hungary debt insurance cost at two-month low on IMF hopes

Default insurance costs on Hungary’s sovereign debt dropped to two-month lows Wednesday on the back of renewed hopes over forthcoming talks on a new IMF/EU loan package following ECB’s endorsement late last week of the amended central bank law.

According to CMA, a major CDS market data monitor in London, Hungary’s five-year credit default swaps (CDS) traded around 495bps late in the session, marking the first sub-500bps spread since early May.

Wednesday’s CDS pricings on Hungary’s sovereign debt compare with record highs of over 750bps seen early this year.

A CDS contract valued at 495bps means that the cost to insure every EUR 10 million worth of bond exposure against default is now below EUR 500,000 a year for the benchmark five-year horizon, a fall of some EUR 250,000 since the beginning of 2012.

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