By Linda Young

Bucharest, Hungary

The Hungarian government abandoned part of its planned debt auction after it had to raise interest rates on the bonds to sell them.

Hungary sold only $62 million in debt rather than the $75 million it planned to sell after being forced to increase the average interest rate on the 10-year bonds it auctioned to 9.7 percent from 8.78 percent.

The country's debt agency, AKK, said that the range of yields offered was too broad.

The country is part of the European Union but not part of the eurozone and its currency is denominated in forints. The target was to sell 18 billion forints in bonds, but it sold only 15 billion forints worth.

Hungary is in talks with the European Commission (EC) and International Monetary Fund over a refinancing package, but negotiators from the EC and IMF have expressed concerns that Hungary's central bank lacks independence.

Standard & Poor's expressed the same concerns last week when it downgraded Hungary's debt rating to junk status. S&P cited changes to the constitution that undermined the independence of the central bank and other institutions as among the factors that led to the downgrade.

Other factors included increased risk that the nation's weakened domestic outlook coupled with a weak global economic outlook would make it too difficult for Hungary to repay its government debt.


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