“This is phenomenal,” said László Búzás, deputy-CEO of ÁKK, commenting that demand 6.5 times exceeded the HUF 500 million-worth bonds the ÁKK originally offered in the transaction. Seeing the demand, the ÁKK allowed that the bonds, which bear 4.75% fixed interest and mature in ten years, be oversubscribed by three times.

The demand for the bonds shows that foreign institutional investors disregard the negative figures on the Hungarian economy. At the same time with the ÁKK’s bond offering, the World Bank issued a warning, saying that Hungary’s public sector deficit in 2005 could exceed the predicted level, similarly to 2004. An analysis by London-based CSFB forecasts that credit rating agency Fitch Ratings might consider revising its rating on Hungary’s foreign-currency debt, if the financing burden of the current account deficit will be seen increasing. Fitch downgraded Hungary’s forint-denominated debt rating in mid-January.

A downgrade of foreign currency debt rating could result in higher interest rate levels on foreign currency bonds issued by ÁKK. However, the two dominant rating agencies, Moody’s and Standard and Poor’s, are unlikely to downgrade Hungary’s debt from the current A rating.

“Buyers of foreign currency bonds can see that the Hungarian economy develops and the government’s fiscal policy is determined to achieve the desired level of public sector deficit,” commented Finance Minister Tibor Draskovics.