Hungary is launching its first Eurobond sale since the defeat of Prime Minister Viktor Orban, seeking to leverage the positive market sentiment driven by the new government's commitment to economic reforms and eventual euro adoption. The country is issuing a €1.5 billion ($1.56 billion) euro-denominated note due in 2034, initially priced around 240 basis points above midswaps, which has since tightened to 205 basis points. Additionally, a green note due in 2040 is being offered, with pricing around 235 basis points over midswaps, down from an initial 270 basis points.
The bond sale marks a strategic move to secure international financing early in the year, a practice Hungary typically follows. Investors have shown increased confidence in Hungary's economy following the recent political shift. The extra yield demanded for Hungary's 10-year domestic bonds over German bunds has fallen to its lowest in five years, and Budapest-listed stocks and the forint have also rallied. This rally has been so significant that Hungary's 10-year benchmark bond yield, at 5.17%, is now within half a percentage point of similar-maturity UK notes, a dramatic narrowing from a 2.6 percentage point gap in March.
Financial institutions like PGIM Ltd., which manages approximately $60 billion in emerging market fixed-income assets, anticipate further gains for Hungary's debt. This positive outlook is based on the incoming government's plans for euro accession, potential interest rate cuts, and an expected injection of billions of euros in European Union aid. Bank of America Corp. economist, Mai Doan, also maintains a "very constructive bias" on Hungarian securities, projecting new market impulses as the euro accession process unfolds under the new Prime Minister Peter Magyar.
