Who would have thought it? Viktor Orban, Hungary’s outspoken prime minister, is getting sympathy from an unusual quarter: the markets.
Far from siding with the International Monetary Fund and the European Union over Budapest’s spat with the multi-lateral institutions, many investors say Orban has a point in his desire to slacken fiscal targets for his country.
Loose talk costs money in the world’s market place. Hungary has found that to its cost. On Thursday, the country saw the first bond auction failure since it was bailed out by the International Monetary Fund in November 2008.
This is nothing to do with parlous finances.The main cause of pressure in the bond markets is the ongoing debt problem of Hungary’s eurozone neighbours. The country is awash with cash and has been showing strong commitment to structural and financial reforms. It has a €20bn loan from the IMF and the European Union, of which it has drawn €14bn. Much of this money is still locked away in the central bank’s reserves.
Emerging markets are doing very nicely out of the Greek crisis. If you don’t fancy Greek two-year bonds at 12.79 per cent, why not buy some other debt – say Turkish at 9.49 per cent?
The rush to emerging market bonds became clear again yesterday when EPFR Global published the latest inflows into the asset class. They now stand at $15.3bn so far this year. Compare that with the previous record of $9.7bn in 2005 – and that was for the whole of that year.