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Hungarian Yields Soar, CDS Hits Record As Bill Auction Fails

Tyler Durden's picture




 

Less than a week after a fully failed 3 Year Hungarian bond auction (in which all bids were rejected by the government) sent Hungarian yields surging on December 29, things have gone from bad to worse culminating with today's 1 Year Bill auction which sold just HUF 35 billion ($140 million) in 1 year bills at a staggering 9.96%, a surge of over 2% compared to the yield for the same maturity debt sold just on December 22. To say that this is unsustainable is an understatement. Alas, with the IMF and EU out of the bailout picture following Hungary's refusal to yield to demands to make its central bank a puppet of the state, ironically categorized by Europe as concerns of central bank "independence" it is likely that Hungary will see far more pain in the coming days as the ECB is certainly not going to be buying Hungarian debt - after all it has its hands full already with those other collapsing Eurozone countries. And punctuating the new year comfort are Hungarian CDS levels which just soared to new records over 750 bps. It is only a matter of time before ISDA decrees that any and every Hungarian default event will be fully voluntary thereby collapsing this latest default protection house of cards.

Hungarian CDS:

More from Bloomberg:

The government sold 35 billion forint ($140 million) in one-year bills, 10 billion forint less than the planned amount, data from the Debt Management Agency on Bloomberg show. The average yield rose to 9.96 percent, the highest since April 2009, from 7.91 percent at the last sale of the same-maturity debt on Dec. 22. The EU and the IMF broke off aid talks last month as the government prepared legislation that threatened to undermine the independence of the central bank. Hungary needs a deal as soon as possible to help maintain market financing and is ready to discuss the conditions, Tamas Fellegi, the minister assigned to lead the talks, told reporters today.

 

“Fellegi’s comments are aimed at providing reassurance, but I think the market will adopt a seeing-is-believing approach,” Timothy Ash, a London-based economist at Royal Bank of Scotland Group Plc, said in an e-mailed comment. “Market trust in this administration is now at rock bottom levels.” Hungary, the EU’s most-indebted eastern member, received its second sovereign-credit downgrade to junk last month when Standard & Poor’s followed Moody’s Investors Service in taking the country out of the investment-grade category on Dec. 21.

 

The cost of insuring Hungarian bonds using credit-default swaps climbed to a record 751.6 basis points from 650 basis points on Jan. 3, data provider CMA said. The benchmark BUX stock index fell 2.9 percent today as OTP Bank Nyrt., the country’s largest lender, sank 3.5 percent and Mol Nyrt., the biggest refiner, declined 3.3 percent. Hungary, which became the first EU country to receive an IMF-led bailout in 2008, shunned fresh aid in 2010 when Viktor Orban took over as prime minister. Orban reversed his policy last year when the state started struggling to raise funds at debt auctions and the forint plummeted.

 

Hungary’s 10-year government bonds fell, lifting the yield 13 basis points to 10.959 percent, the highest since April 2009.

And some trading desk color:

HUNGARY HAS DOMINATED THE ATTENTION HERE THIS MORNING IN
LONDON. THE MARKET OPENED EXTREMELY WEAK (CDS OPENED AT 720/750).  THE FIRST TRADE WAS UP AT 755, PAYING ON,
WHICH WAS +40BPS. THERE WAS THEN A PRESS CONFERENCE WHERE MINISTER FINEGELLI
DECLARED HUNGARY WANTS AN IMF DEAL ASAP FOR THE MARKET AND THAT THE SOVEREIGN
WOULD MAKE A "HUGE EFFORT" TO CUT DEBT. BONDS RALLIED A BIT AS THE
CURRENCY CAME BACK FROM 323.67 TO 321.82. AFTER, HOWEVER, BBG REPORTED THAT
HUNGARY FAILED TO RAISE PLANNED AMOUNT OF DEBT IN A LOCAL T-BILL ACUTION. THE
AVERAGE YIELD ON THIS AUCTION WENT TO 9.96% FROM 7.91% AT THE LAST SALE OF THE
SAME MATURITY ON DEC 22.

 

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Thu, 01/05/2012 - 08:52 | 2035003 Mae Kadoodie
Mae Kadoodie's picture

Hungary for a bid I would say.

Thu, 01/05/2012 - 09:07 | 2035026 Arthor Bearing
Arthor Bearing's picture

One of these days I will buy the CDS BEFORE the bid fails!

Thu, 01/05/2012 - 09:28 | 2035045 Oh regional Indian
Oh regional Indian's picture

The more the Eu Zone un-ravels, the more you realize that it cannot possibly hold together. FOFA's thesis notwithstanding, in this climate, nations have to work together.

That, in Europe is asking for too much. Which leads one to the conclusion that save the core, the rest will be pushed into massive IMF debt and austerity clauses that escalate and ratchet....

Vulture Capitalism at it's finest. The carcass is Sovereignity.

ori

slice-of-life-in-pictures/

Thu, 01/05/2012 - 09:37 | 2035063 LawsofPhysics
LawsofPhysics's picture

You of all people on this site should know that everyone's reality is what they make it.  What the hell does it mean to be part of a "sovereign" nation to a mass of people who are barely literate and completely destructive on the best days.  It means nothing.  Extend and pretend WILL continue, none of the paper "wealth" is real and nothing will change until supply lines for all sorts of essential items/materials/resources start getting cut.  Then it just gets bloody.  Those in positions of power know this and their (mostly family) predecessors have known this and are quite capable of dealing with it.

Thu, 01/05/2012 - 09:43 | 2035080 Oh regional Indian
Oh regional Indian's picture

Funny you should say that LOP. I was just thinking that the Word Hungary, or Europe, Or the USA or any "Sovereign", is two or three distinct entities. 

People, Politicians and Power Brokers.

The latter two care not a whit for the first, the very reason for their being.

Agree completely.

ori

Thu, 01/05/2012 - 08:54 | 2035008 GeneMarchbanks
GeneMarchbanks's picture

'Hungary, which became the first EU country to receive an IMF-led bailout in 2008, shunned fresh aid in 2010 when Viktor Orban took over as prime minister.'

Well that's a start. Now brace yourselves for the EHMs and jackals...

Thu, 01/05/2012 - 08:56 | 2035011 The Reich
Thu, 01/05/2012 - 09:01 | 2035012 Rip van Wrinkle
Rip van Wrinkle's picture

Bye, bye Austrian banking system.

 

Unless you're wrong, Tyler, and the ECB does ride to the rescue??

Thu, 01/05/2012 - 09:06 | 2035024 EscapeKey
EscapeKey's picture

If the ECB does ride to the rescue, it will only be to rescue their own banks. No chance they will aid a competing central banking system.

Thu, 01/05/2012 - 09:09 | 2035029 Non Passaran
Non Passaran's picture

Competing in theft :-)
The Hungarian government is pretty insane in their ways.
Maybe SnP would like to withdraw and revise their latest opinion on Austria now?

Thu, 01/05/2012 - 09:42 | 2035078 ricksventures
ricksventures's picture

Insane ??? Having a sovereignty is now called insane ?

Perhaps if they hanged that criminal jew Simor Andras with off-shore stolen money during the previous regime, the head of central bank in Hungary then that would be sane right ?

 

Orban should declare that maoist Barosso can go fuck himself and declare the Austrian banks nationalized as a thank you, lets see those cocksuckers then what they do

 

NOWHERE in EU is central bank independent, but in Hungary it must be guided by the international jews who would mind a nuclear war over "profit" taken away from him, WELL its time to go nuclear then

Thu, 01/05/2012 - 10:20 | 2035179 Non Passaran
Non Passaran's picture

You probably noticed I above (in other comments) expressed my dislike for EU oligarchs, so no disagreement about that.
Are you aware, sir, that the Orban gubbimint pilfered - sorry, borrowed - virtually all private pension money for their mad experiments? We're not talking about a Ron Paul of Europe here, he's more likely a Musollini. Google it up. That man is no less dangerous than the European bozos he's been fighting. A statist vs. the etatists :-)

Thu, 01/05/2012 - 10:58 | 2035355 ricksventures
ricksventures's picture

in 10 years there will be no pension in EU, guaranteed, doesnt matter private or public and same for california and almost all states of USA, AAAND dear leader Obama is using his chunk of "pensions" for his "mad experiments" so whats the difference ??? NONE

AAAND neighboring Slovakia is CHECK THIS: having their private pensions being invested into GREEECE :)))) as oppose to Orbans being used to pay off the communal debts used to create infrastructure in Hungary, while the Slovakia is still getting into debt, Hungary has stopped or minimized the need for debt, but off course the system is not as efficient as Austria and probable never be and that's why its some form of "game over" for all EU not just East or South or West, Florence Italy was build on debt back in middle ages and it still makes tons of money from tourist

 

EVERYTHING HAS TO DEFAULT, THE WHOLE EU AND START OVER, there is no other way, if Hungary defaults many of those debts were purchased check this: by private pension funds in USA :))) so there is your private vs. public, then their dear leader obama will have to cover that with public debt just like in Slovakia so same shit everywhere

Thu, 01/05/2012 - 11:06 | 2035373 ricksventures
ricksventures's picture

speaking of Musollini, check out his building in Rome, pretty coo, way nicer than what EU burocrats are building today PC crap 

http://www.justurbanism.com/2007/08/on_mussolinis_fascist_rome/

 

Thu, 01/05/2012 - 11:13 | 2035402 compound interest
compound interest's picture

"We're not talking about a Ron Paul of Europe here, he's more likely a Musollini"

 

I would say: Orban is like Chavez (without oil reserves). He's a rat. Worse than any banksta. Those bankstas in the ECB and the FED at least understand the game. They are evil, but they know what they are doing. This hungarian PM does not even understand what he's doing. Hungary should not be in this situation right now, its rogue government brought the country to this mess without any outside pressure. Hungary is an indebted country, but it was not an immediate default situation. Now it can be soon, thanks to this gangster government.

Thu, 01/05/2012 - 11:45 | 2035499 ricksventures
ricksventures's picture

obviously you don't even know the history and facts, but claim to understand what is really going on...

under banksta you mean the IMF and the head of ECB and FED ?

the country WAS bankrupt under previous non-hungarian government headed by MSZP and the international "bankstas" like the current head of central bank Simor with off-shore accounts on the island of Cyprus

Chavez is a communist monkey whose living is COMPLETELY dependent on oil and cocaina for the US druggies that elect their dear leaders,

exactly the previous Hungarian government was the Chavez you mention with a hint of jew banker blood, Orban is trying to clean up the mess which doesnt fit the local commies and their international bankstas

Venezuela has literacy rate of about 30% so its easy govern those indians, you just give them shiny mirrors and a red flag and some rice and beans, that is not the case in Hungary and Budapest is not the murder capital of the world as oppose to Caracas which is.

Thu, 01/05/2012 - 12:11 | 2035618 compound interest
compound interest's picture

"Chavez is a communist monkey"

Orban too. The only difference is that Chavez DOES have some leverage, DOES have some resources in his country.

Thu, 01/05/2012 - 12:18 | 2035647 compound interest
compound interest's picture

".. Venezuela has literacy rate of about 30% so its easy govern those indians, you just give them shiny mirrors and a red flag and some rice and beans, that is not the case in Hungary and Budapest is not the murder capital of the world as oppose to Caracas which is. .."

 

true that. It is much harder making a Chavez-like system inside the EU. (thank God)

Thu, 01/05/2012 - 10:59 | 2035357 compound interest
compound interest's picture

Hungary is a small country that's addict on EU money flow. Without EU subsidies Hungary would have -25% GDP "growth" / year. Talking about the sovereignty of a country where there are no projects now without EU subsidies is a joke (so you're a joker). This country would suddenly become very-very poor outside of the EU.

Thu, 01/05/2012 - 11:24 | 2035441 ricksventures
ricksventures's picture

thats like when libs claim that alabama gets more fed money than it pays in taxes compared to ny or ca, yet somehow those magic subsidies" mostly end up in pockets of politicians or some "sun-factory" :))) and bridges to nowhere....same here same here and same in other east EU like Slovakia so connecting that to growth is lame

what is france and their farmers without subsidies ??? hungary still has a cheap work force and elderly are used to living off nothing compared to french pensionists that will scream once france and their pension system collapses and collapce it will

WHAT EXACTLY SHOULD Orban do ??? is there independent central bank in Germany ??? on paper yes BUT read ZH to know that its not

Obviously you have not seen how many corrupt socialists from previous government went to prison, you would be surprised....

 

Thu, 01/05/2012 - 12:08 | 2035601 compound interest
compound interest's picture

I'm working and living in Hungary. I am a corporate credit risk manager, and I work for a lender that finances companies with subsidised loans (from EU source, but not bank sources, google 'JEREMIE Holding Fund'). I have a clear view on how dependent this small country is on these subsidies, believe me. There is no more credit source now in this country since the banks were forced to have a 25% haircut on their good performing loans. Not the bad loans, but the good ones. Show me any other country which made such a suicidal step. Of course, the banks don't lend anymore. There is no lending activity now in Hungary based on bank money markets. The only source for financing are these subsidised loans and subsidies, directly from the EU funds.

In general: I started reading ZH 2 years ago, registered 1 year ago. Have found many values on this site, read it every day, and learnt many things about the central bankers of the world, and the nature of fiat money (not just here, I read other sources, too). I think everyone has to read more about these things, but it is not that simple as "money was created out of thin air, so money is nothing, so I don't want to repay my debt because that is nothing". It is just one part of the whole complicated truth. I think if you financed the building of your house with a CHF-based mortgage, and your house was finished, then that money was something. It can't be nothing, if it built your house! It must be something. Money is a form of the trust between people. A credit crunch means that people made promises to each other that can't be kept.

"WHAT EXACTLY SHOULD Orban do ???"  hanging himself would just do it, EURHUF would go down immediately...

Thu, 01/05/2012 - 09:04 | 2035017 MieleBauknecht
MieleBauknecht's picture

bad news for austria, the domino behind hungary. Don't expect the ecb to bail out this non-eurozone country

Thu, 01/05/2012 - 09:45 | 2035085 ricksventures
ricksventures's picture

WRONG !

they dont bail out anyone, they just print to cover their expenses, dont you read ZH ???

ECB would never let Austria to fail and thus they must deal with Hungary, without Austria there is no "ECB" more or less....

Thu, 01/05/2012 - 09:04 | 2035019 Irish66
Irish66's picture

OT..retail dec comps look bad

Thu, 01/05/2012 - 09:05 | 2035020 Zola
Zola's picture

first CDS domino ?

Thu, 01/05/2012 - 09:12 | 2035032 GeneMarchbanks
GeneMarchbanks's picture

You're thinking of the other CDS, this CDS(Can't Do Shit) is theater...

Thu, 01/05/2012 - 09:31 | 2035048 GMadScientist
GMadScientist's picture

"What CDS?" - ISDA

Thu, 01/05/2012 - 10:53 | 2035341 Zero Govt
Zero Govt's picture

CDS = Can't Do Shit
I like that ...anyone know if a CDS has ever performed?!!

Thu, 01/05/2012 - 09:05 | 2035021 EscapeKey
EscapeKey's picture

The world's central bank, the BIS, doesn't like competition.

Now, if Iran could please ask for gold as payment for oil, we'd have the cartel declaring war in 0.3 seconds.

Thu, 01/05/2012 - 09:06 | 2035025 Non Passaran
Non Passaran's picture

They may be able to survive like Ireland. Fortunately or not, they're not in eurozone.
And as to the Rip's comment about the ECB, I don't see what it has to do with Hungary?
They need just a bit "stronger" financial management of their citizenry. :-)

Thu, 01/05/2012 - 09:10 | 2035028 BennyBoy
BennyBoy's picture

Coming soon: A Goldman, FED or ECB goon to be PM.

OR

Iceland 2, The Sequel

 

Thu, 01/05/2012 - 10:59 | 2035346 Zero Govt
Zero Govt's picture

it'll have to be Option 2 ...as Hungarians simply haven't the money to be bled dry for decades by banksters through the tax system

Thu, 01/05/2012 - 09:16 | 2035035 ZeroPower
ZeroPower's picture

Idiots. They can print all the HUFs they want. 

If only the CEE countries could take a look at their very respectable brother, Poland, and follow. 

Thu, 01/05/2012 - 09:21 | 2035040 GeneMarchbanks
GeneMarchbanks's picture

Elaborate please...

Maybe make a suggestion or two...

Thu, 01/05/2012 - 09:33 | 2035051 Sziget
Sziget's picture

If we (I'm Hungarian) could just ctrl+p why do you think the government stalks around the central bank so much? And thats the very way we got to get the Forint in 1946. My grandfather was the favourite guest at bars that time because his wallet was a goldchain and pincers.

Poland has much less debt, 4x population with lower median age.

Thu, 01/05/2012 - 09:54 | 2035105 ricksventures
ricksventures's picture

Poland also is a depressed (sorry to say) shithole with almost no infrastructure, no highway system, nothing of a real value, if Hungary fails (whatever that means, i dont know) the polish and czeck currency will suffer hugely and EU will not stand, all of EU is old and living longer

 

As far as the rights to print, yes only the international jew is allowed to print and distribute, all rest of you suck his dick and obey

Thu, 01/05/2012 - 11:02 | 2035367 Zero Govt
Zero Govt's picture

Poland has coal ....they've been one of the brightest economies to date in the EU through this recession in actual fact

Thu, 01/05/2012 - 11:33 | 2035461 ricksventures
ricksventures's picture

Poland is dependend on export to Germany, just like rest of East EU is

have you ever been to Poland and criss crossed it or you just read the statistics ???

Thu, 01/05/2012 - 19:12 | 2037391 Zero Govt
Zero Govt's picture

been through Poland, the worst roads i've ever driven on

Thu, 01/05/2012 - 09:17 | 2035037 Gamma735
Gamma735's picture

Maybe Germany could annex Hungary.   Oh, wait! Didn't Germany already try that?

Thu, 01/05/2012 - 09:31 | 2035050 Ahwooga
Ahwooga's picture

And yet european equity markets are now pretty much 1% off their lows. Nothing changes except the date on December 31 and we are up 3%. The entire Eurozone sovereign debt system is on the brink of collapse and we cant even hang onto 0.75% down for a morning. My word, am I getting tired of watching this channel every day...

Thu, 01/05/2012 - 09:41 | 2035074 LawsofPhysics
LawsofPhysics's picture

As many have pointed out already with numerous evidence, the "printing" or "adding zeros" or whatever the fuck the particular paper pushing fucknut in charge wants to call it has never stopped.  In fact is has only intensified.  Remember, sometimes in politics "you have to lie".  Make sense I guess, most people do not take the truth that well.

Thu, 01/05/2012 - 09:39 | 2035067 AU5K
AU5K's picture

No goulash for you !

Thu, 01/05/2012 - 10:40 | 2035285 chindit13
chindit13's picture

This is why the SNB set a floor on the SFREUR, albeit it seems to no avail.  Hungarians borrowed in non-forint currencies for the mortgages that drove their own property bubble, and much of this was from Swiss (and Austrian) banks.  Now both of these two creditors will feel the heat.  Two Swiss banks---UBS and CS---both with >30:1 leverage and representing a combined 500% of Swiss GDP (vs. a combined 65% for the US' five largest banks).  Swiss banks have 25% of Swiss GDP exposure to emerging markets, most of whic is Eastern Europe.  Austrian banks hold exposures equal to 75% of Austrian GDP to emerging markets.  I noted this two and a half years ago, and then waited.  Now it comes home to roost.

It is going to hurt.  The Swissie trading worse than .95 this morning is no fluke.

Thu, 01/05/2012 - 11:37 | 2035475 TzaristBondHolder
TzaristBondHolder's picture

They borrowed heavily in Swiss, how will they ever afford the repayments?

Thu, 01/05/2012 - 13:36 | 2036014 AntiLeMaire
AntiLeMaire's picture

Kids, Hungary is not part of the EUROzone.

The Hungarian currency is the forint (HUF), not EURO.

So obviously the ECB won't help ... DUH.

 

There is no problem from the viewpoint of the HUN government, as they can print all the HUF's that they'll ever need.

Works for the BoE ... ;)

Thu, 01/05/2012 - 14:50 | 2036259 hungarianboy
hungarianboy's picture

Hungary IS part of the Euro Zone. The only thing is we still have the HUF as currency.

But that will change in the future to if Hungary can get it's shit together.

Thu, 01/05/2012 - 17:30 | 2036986 AntiLeMaire
AntiLeMaire's picture

They (HU) are a member of the European Union (EU). They (HU) are not part of the EUROzone, then they would have EUR as their currency, not HUF.

UK is a member of the EU but they are not part of the Eurozone (EZ) because they still have GBP as their currency.

?Ies simple no?

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