Hungary filed to issue as much as $5 billion of bonds in the U.S. as the European Union’s most-indebted eastern nation prepares to follow other emerging-market issuers seeking international funding.
The yield on Hungary’s dollar bonds due 2023 jumped 14 basis points to 6.17 percent by 11:30 a.m. in Budapest, climbing from a one-month low of 6.02 percent two days ago. The “shelf” registration allows Hungary to sell the securities in one or more offerings, according to a document published by the Securities and Exchange Commission in New York yesterday.
Developing nations from Romania to Russia and South Africa sold international bonds last week before the Federal Reserve meets today to decide whether to curb monetary stimulus that has boosted emerging-market assets. Hungary, which raised $3.25 billion in February in its first sale of foreign bonds in 21 months, may sell more to prefinance for notes maturing in 2014, the Economy Ministry said in an online briefing on Aug. 22.
“With the application for SEC registration, the foreign-currency sale the government has hinted at is getting ever closer,” Levente Blaho and Adam Keszeg, Budapest-based analysts at Raiffeisen Bank International AG (RBI), wrote in a research report today. “There are no details or timing available yet and the $5 billion limit can be exhausted in more than one issuance.”
Hungary’s dollar debt has gained 1.6 percent this quarter, the biggest advance in eastern Europe and compared with a 0.2 percent decline in the Bloomberg Emerging Market Sovereign-Debt Index. (BEMS) The cost to insure Hungary’s dollar notes against non-payment using credit-default swaps declined to 289 basis points today, the lowest level on a closing basis since June 17.
The SEC registration prepares the regulatory ground for an offering without any obligation that a sale should go ahead.
Hungary’s Debt Management Agency didn’t immediately respond to questions requesting further comment on bond sale plans sent by e-mail and a telephone call to the office of Laszlo Andras Borbely, the organisation’s deputy chief executive officer.
The government “would almost certainly want to come to the market” before a 1 billion euro ($1.3 billion) note matures on Jan. 29, 2014, said Abbas Ameli-Renani, a London-based emerging-markets analyst at Royal Bank of Scotland Group Plc. The debt agency will “likely” issue less than the $3.25 billion in February, Ameli-Renani said in an e-mail today.
The registration for a potential sale is “positive” for the forint and local-currency debt and “negative” for existing foreign-currency notes, the RBS analyst said.
The forint weakened 0.3 percent to 297.94 against the euro, extending its decline in the third quarter to 0.9 percent. The yield on Hungary’s 10-year forint notes increased two basis points to 6.04 percent today.
Source: Bloomberg, Photo: bankofnaturalcapital.com