Hungary's government bond yields rose sharply and the forint declined following reports of Prime Minister Viktor Orban's proposed fiscal measures, triggering investor concern over economic stability and inflation risks.
- 10-year Hungarian government bond yield rose to 7.85%
- Forint weakened to 398.7 per euro
- Potential 500 billion forint infrastructure package under discussion
- Inflation rate at 6.3% in November
- Yield spread with German bonds widened to 428 basis points
- $43 million in investor outflows from Hungarian equities over two days
Hungarian government bonds declined significantly on Thursday, with the 10-year yield jumping to 7.85%—up from 7.42% the previous day—as market participants reacted to leaked details of Prime Minister Viktor Orban’s proposed economic reforms. The forint weakened to 398.7 per euro, its weakest level since October 2023, reflecting growing risk aversion among international investors. The shift followed reports that Orban’s administration is considering new state-backed credit guarantees and expanded public spending to support domestic industries, including a potential 500 billion forint ($1.25 billion) infrastructure package. These measures, while aimed at boosting growth, have raised concerns about fiscal discipline and potential inflationary pressures, especially given Hungary’s already elevated inflation rate of 6.3% in November. Bond market indicators signaled heightened risk perception, with the yield spread between Hungarian and German 10-year bonds widening to 428 basis points—its highest level since late 2022. The increase in yields reflects investor demand for higher returns to compensate for perceived policy uncertainty and potential currency volatility. The developments impacted financial markets beyond Hungary, with regional EM bond indices dropping 0.8% and investor outflows from Hungarian equities reaching $43 million in two days. Market participants are now closely monitoring upcoming government statements for clarity on the fiscal direction.