Yesterday’s news was that the credit rating agency Fitch affirmed Hungary’s credit rating in the “junk grade”. They really didn’t bother much about the steadily improving macroeconomic figures Hungary has been producing recently (the budget deficit being firmly below 3%, GDP growth becoming stronger than expected, a big trade balance surplus, Hungary’s stopping the growth of its public debt, the slightly decreasing unemployment rate while the economic activity is increasing (!), the all time low inflation rate or the steady demand for Hungary’s treasury bills at an all time low base rate, etc.). The key sentence in their report must have been this: “Fiscal discipline contrasts with unpredictable economic policies, especially with respect to the banking and utilities sectors.” In other words: the Financial Empire strikes back.
Let’s note that the big (US-based) credit rating agencies (Fitch, Standard and Poor’s and Moody’s) rated Hungary’s creditworthiness many, many grade higher, in the “investment grade” in the autumn of 2008 when, due to the economic amok running of the so-called Socialists and Liberals, Hungary de facto defaulted and only a 25 billion Euro EU/IMF-loan, which was fully repaid by the Orbán government seven months before its expiry, could save the country from the financial collapse. In contrast, these credit rating agencies all lowered Hungary’s rating to the “junk” category at the end of 2010 when it became apparent to them that the Orbán government is not going to dance to the IMF tune.
And what was the market reaction at today’s Hungarian government bond auction to the “junk bond” evaluation of Fitch yesterday evening ? Significant yield drops on all the bond types.
- The Big 3 credit ratings agencies have a new competitor (business.financialpost.com)
- More signs of economic recovery (politicsinhungary.wordpress.com)
- Big bank bets on economic recovery (politicsinhungary.wordpress.com)