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Macroeconomic News


Hungary in talks with Azerbaijan about sovereign issue-paper

Thu, 23rd Aug 2012 12:49


BUDAPEST, Aug 23 (Reuters) - Oil exporter Azerbaijan could lend Hungary 2-
3 billion euros by buying a specially-issued sovereign bond denominated in Turkish lira, Hungarian business weekly Figyelo reported on Thursday citing an unnamed source close to Hungary's Economy Ministry.

Hungary, which started talks with the IMF and EU about a stand-by loan in June, has not tapped international markets so far this year but has been issuing forint-denominated debt.

Reuters reported earlier this month from Istanbul that Hungary was in talks with Turkey and Azerbaijan to issue sovereign bonds in local currencies as the country looks to tap potential new markets for debt financing.

Figyelo said talks about a potential debt issue targeted at Azerbaijan have been going on for months and the transaction may happen before Hungary signs any deal with the European Union and International Monetary Fund.

It said Azerbaijan could be attracted by the high yields Hungary is paying on its debt. Hungary's debt burden and its often fractious relationship with institutions such as the EU have driven up its borrowing costs.

Hungary's debt agency AKK told Reuters it was looking at alternative markets for potential issuance within the Hungarian government's policy of 'opening towards the east.'

But the AKK said it was not planning to publicly tap international markets before a deal with the International Monetary Fund (IMF).

'The AKK is not planning to publicly issue foreign currency denominated government papers before an agreement is reached with the IMF,' the debt agency said.

Earlier this month, Turkish officials told Reuters that a major Turkish brokerage firm would be mandated for a local currency issue and Turkey's Capital Markets Board confirmed that the regulator and Turkish Treasury were working on the regulations for the issuance of a Hungarian bond.

Azerbaijan's $33 billion state oil fund plans to cut its exposure to European bond markets and focus on emerging economies amid growing risks in the euro zone, the Azeri fund's executive director said in July.

Investors expect the negotiations to resume in the autumn, but analysts have said the talks will be tough as Hungary's government will stick to its unconventional economic policies and would resist calls for deeper spending cuts.



(Reporting by Krisztina Than; Editing by Ruth Pitchford) Keywords: HUNGARY ISSUANCE/AZERI

(krisztina.than@thomsonreuters.com)(+36 1 327 4745)(Reuters Messaging: krisztina.than.thomsonreuters.com@reuters.net)

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