Hungary returns to bond market after IMF talks stall

Hungary borrowed $3.25 billion (2.41 billion euros) in a return to the bond market late on Tuesday after almost two years.

In Hungary's first bond sale since May 2011 and the recent breakdown in its talks with the International Monetary Fund, Hungary sold $1.25 billion of 5-year bonds at 335 basis points (3.35 percentage points) over the corresponding US Treasury yields.

It also raised $2 billion with 10-year notes at 345 basis points over the benchmark, Laszlo Andras Borbely deputy head of the government debt management agency AKK, said on Wednesday.

In an interview on state radio, Borbely said the AKK opted for a dollar bond issue due to demand by US investment funds for higher risk, higher yield papers.

"The year's international bond programme has been more than half completed with Tuesday's successful issue," he added.

Borbely said the issue was swapped into euros worth 2.5 billion.

The proceeds compare to this year's foreign exchange expiries of 5.1 billion euros, of which AKK plans to repay 4-4.5 billion through bond issues.

Hungary, not a member of the eurozone, is in recession and had been seeking a 15-billion-euro ($19.2-billion) aid package from the EU and the IMF since 2011.

The long-running talks stalled, however, due to the lenders' concerns over the independence of Hungary's central bank and the government's economic policies they said were 'unsustainable'.

On January 30, Hungary's Prime Minister Viktor Orban said in Brussels that the negotiations were "coming to an end".

"We don’t need a loan because we’d prefer to be financed via the markets," he added.

In launching the dollar bond, Hungary took advantage of a "dramatic improvement" in the market in Europe, and in particular the euro zone, analysts told Hungarian state news agency MTI Wednesday.