Ireland, Hungary Have Success in Debt Sales

Discussion in 'Wall St. News' started by ASusilovic, Sep 9, 2010.

  1. Announcements by the Irish government about Anglo Irish Bank Corp. and by the Hungarian government on its 2011 budget target Wednesday paved the way for well-received government-debt auctions in both countries Thursday, but analysts said good execution of the plans will be decisive.

    Ireland sold just €400 million ($508.6 million) of treasury bills, at the bottom of its targeted amount of €400 million to €600 million, but it paid lower yields than previously. Hungary sold 40% more bonds than planned, although at higher yields than two weeks ago but with reassuring coverage ratios.

    Debt markets reacted well to both tenders, and the cost of credit-default swaps, or CDS, fell after the auctions in a sign of relief. The Hungarian forint firmed to about 285 forint to the euro after the auction, from 287.50 forint before it, and 289.50 forint on Wednesday prior to the government's pledge about the 2011 budget deficit.

    CDS are tradable, over-the-counter derivatives that function like insurance against default by a borrower. Swap buyers may be protecting investments they own or making bearish bets against companies or countries.