Since coming to power in April 2010, Viktor Orban’s Fidesz government has given Hungarian bond investors a rough ride with a succession of unorthodox and populist measures, from introducing crisis taxes on banks and other foreign-dominated sectors to cutting off ties with the IMF, nationalizing private pension funds, and forcing banks to accept heavy write-downs on foreign-currency-denominated mortgage debt.
Inevitably, spreads on Hungarian debt have soared, ratings have sunk – all three ratings agencies removed Hungary’s investment-grade status between November and January – and the forint has plummeted, exacerbating the country’s already acute difficulties in dealing with an external debt level of 140% of GDP.
The announcement in November that Hungary would swallow its pride and go back to the IMF for a standby agreement brought some comfort, but that was negated by the protracted delay in getting to the negotiating table because of the government’s failure to address European Commission concerns over moves to restrict the independence of the central bank.
Then in late March, the new head of debt management agency AKK announced that Hungary was considering coming to the Eurobond market to fund all or part of its €4.6
