The deal, which priced on Tuesday and amassed a total of $12.5 billion of orders, rammed home the country's ability to access the debt capital markets without an IMF financing agreement in place.
A $5.5 billion book was built for the $1.25 billion 4.125% 2018s and a $7 billion book for the $2 billion 5.375% 2023s. Leads were BNP Paribas, Citi, Deutsche Bank and Goldman Sachs.
“When you consider the previous largest sovereign deal in EM (emerging markets) this year was Israel with $2 billion, this represented an impressive achievement,” said Neil Slee, a syndicate official at Goldman Sachs in London.
The issue was the first from the country for nearly two years after the sovereign’s CDS spiked in 2011 to above 750 basis points.
Hungary’s curve has, however, been one of the best performing bonds in the CEEMEA region since last summer when the rally in emerging markets became strong. Its 2021s have fallen from a yield of around 5.8% in August to around 4.7% this month.
“It’s a core CEE sovereign which most EM investors hold in their portfolios as a frequent issuer,” said another banker working on the deal.
“When it disappeared from the market for two years, the effect on technicals was considerable. The secondaries crunched tighter and on its return the demand was broad and deep, provided the price was right.”
The bonds were performing well on Wednesday morning. The 2018s were priced at 99.58 and are trading at 100-100.25. The 2023s were priced at 99.564 and are bid at 101. But even with a curve that has been crunched over the last few months, the country paid little new issue premium for the notes.
The five year tranche priced at 335bp over US Treasuries or 320bp over mid-swaps. The 10 year priced at 345bp over US Treasuries, or 336bp over mid-swaps.
At the time of announcing the trade, the existing 2021 benchmark was spotted at a Z-spread of 320bp and bankers said that around 5bp would need to be added to extend the curve out to 10 years.
A syndicate banker on the deal called the final new issue premium for the 10 year around 10bp, and said that the five year was printed close to flat to Hungary’s theoretical curve, based on the five to 10 year spreads of other CEE sovereigns such as Latvia and Croatia.
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