(We mean martingale, the betting strategy, not the quant model!)I dropped a comment on MarketBeat's post, "Hungarian Forint Hits New Lows, as Austria Watches Nervously":
Here’s the thing about Hungary, as we see it anyway. If you look at things like the current account, for example, it says “fixable by the IMF”. It’s in surplus, if deteriorating.
Everything the government does, however, says “bonkers”.
Bonkers, verging on sinister, and becoming increasingly binary: heads, an IMF loan and tails, a nasty well… tail (risk).
At any rate, it is now normal to be ultra-bearish on Hungary. On Wednesday alone:
- Five-year Hungary CDS hit a record high (over 700bps, according to Markit).
- Five-year Hungarian bond yields rose above 10.5 per cent.
The last development is especially worrying because it suggests that the central bank’s past rate hike and those anticipated in the future may no longer be offering much support to the forint, in place of using the FX reserves which Hungary’s last IMF bailout helped to restore (and which are much healthier than in 2008). Not a good prospect when the central bank is at the government’s heel, there is now constant speculation that the next step will indeed be to raid the reserves to cut government debt (which the government constantly denies), and the IMF won’t talk until the central bank is freed from its new legal dependence....MORE
- Above all, the Hungarian forint continues to hug all-time lows against the euro.
Here are some members of Hungary's third largest political party: