BNY’s Geoff Yu describes Hungary as a constructive story within EMEA, with post-election re-rating and scope for continued MNB easing. Yu notes corporate flows are strong, spreads still compensatory, and argues Hungarian Forint (HUF) can make a stronger case as a carry currency if inflation stays contained, even as power and energy constraints justify caution on duration and fiscal risks.

Constructive on HUF and MNB path

“Hungary is the first test. Hungary now tests whether easing can continue despite supply and fiscal constraints. The Magyar Nemzeti Bank (MNB) meets this week after a strong post-election re-rating, including a 200bp drop in the 10y government yield.”

“Hungary is constructive. We remain bullish on Hungary, although client positioning argues for selectivity. Duration is expensive given fiscal slippage risk, and sovereign flows, while positive, are weaker than in Q1 and Q2.”

“Given the easing in financial conditions across the Eurozone and the U.S. Treasury’s actions, HUF can make a stronger case for carry status as long as inflation figures remain contained. Clear supply constraints in power and energy justify some caution, but activity is slowing sufficiently for MNB to continue easing.”

“Corporate flows tell a stronger story, surging to their strongest level in six months. Public-sector institutional reforms are beginning, and markets appear to expect positive spillovers into the private sector. Spreads still offer enough compensation to sustain demand.”

“Hungary now tests whether easing can continue despite supply and fiscal constraints. The Magyar Nemzeti Bank (MNB) meets this week after a strong post-election re-rating, including a 200bp drop in the 10y government yield. The full-year deficit remains on track to reach 7.5% of GDP but record monthly surpluses in June and July change the near-term picture.”