With all the focus on the Europe at the moment, some pretty key developments in the global markets are being hugely under-reported and under-analysed. Julian Robertson first pointed towards Hungary as a country with real weakness and, as a result, we have started to monitor the country and its progress.
Today, a key development was made in the crisis that is occurring in Hungary. Their sovereign debt raised to their highest yield levels for 2 years, reaching a 10yr yield in excess of 8.5%. At this level, the country is pretty much closed off to the capital markets and will likely require another round of IMF help.
Standard and Poor's, who downgraded the debt to BBB- this month, had this to say:
"Hungary’s “unpredictable” policies, including the dismantling of checks on policies, levying of extraordinary industry taxes and forcing lenders to swallow exchange-rate losses on loans, are harming investment and growth at a time when the economic environment is deteriorating"
For those looking to trade this weakness, we advise looking at the NOKHUF or CADHUF currency pair as an avenue where substantial gains are being made.
The graph below shows the 10yr Hungarian/Bund Spread
More to come in due course.
Tick By Tick Team