Hungary bond yields fall as new government targets fiscal reform

Hungarian Prime Minister Peter Maggia presented a budget aiming to reduce the fiscal deficit from an estimated 7.5% of GDP this year to 4.9% next year through spending cuts, a wealth tax, and higher taxes on large corporations. The government plans to achieve a deficit below 3% by 2030 to meet Eurozone entry criteria, which also requires maintaining state debt around 75% of GDP and staying in the ERM2 exchange rate mechanism for at least two years. Since Maggia's election in April, yields on 10-year Hungarian government bonds have fallen from 6.5% to approximately 5.5% in Forint and 4.85% in Euro. The rating agency Scope raised its outlook to positive. The Euro-denominated bonds offer a yield premium of roughly 1.5 percentage points over comparable German Bunds, presenting a potential capital gain opportunity if Hungary successfully integrates into the Eurozone. The market response reflects confidence in the new administration's commitment to fiscal discipline and European integration.