June 4 -- Credit-default swaps on sovereign bonds surged to a record on speculation
Europe’s debt crisis is worsening after Hungary said it’s in a “very grave situation”
because a previous government lied about the economy.
Hungary’s bonds fell after a spokesman for Prime Minister Viktor Orban said talk of a default is “not an exaggeration” because a previous administration
“manipulated” figures. The country was bailed out with a 20 billion-euro ($24
billion) aid package from the European Union and International Monetary Fund in
2008.
“The comments out of Hungary have really spooked the market,” said Rajeev Shah, a credit strategist at BNP Paribas SA in London. “Investors are interpreting
it as bad sign for trying to tackle Europe’s debt crisis.”
The euro dropped below $1.21 for the first time since April 2006, stocks tumbled
and the cost of insuring against corporate default rose on speculation Hungary
will weaken the EU’s willingness to rescue the region’s indebted nations.
Credit markets were also roiled after data showed U.S. employers hired fewer
workers in May than forecast, signaling slowing economic growth.
