The Budapest government saw borrowing costs soar and the currency plunge as traders bet that international authorities may abandon Hungary, letting it become the first European Union country to default on its debts.
The florint fell more than 1pc to a record low against the euro and bond yields soared over 10pc. The Hungarian government, which has defied Brussels by introducing a raft of radical constitutional reforms, called off its plans to swap old debt for new because it would be too expensive.
I don\’t know the details there at all. Only that yields of over 10% when base rate is 7.5% don\’t seem that terrible.
Yes, Hungarian base rate is 7.5%. For they\’ve their own currency you see, the forint.
And according to absolutely everyone a country with its own currency, its own central bank, its own printing presses, can never actually go bankrupt, never actually need to default.
As long as it is borrowing in its own currency that is and these bonds are indeed forint bonds.
So, what is special about Hungary that this \”it can\’t ever happen\” rule doesn\’t apply to them? Or alternatively, maybe the can\’t ever happen rule is wrong?
And if its the latter, then some of the people urging reflation and borrow and damn the bond vigilantes here in the UK have some \’splainin\’ to do, no?