Hungarian government bonds have been one of the most lucrative bets in emerging markets this year after the ousting of former prime minister Viktor Orbán, gaining around 11 per cent total return versus about 1 per cent for a JPMorgan index of domestic emerging‑market debt.

The rally followed a landslide victory for Péter Magyar’s Tisza party in April, sparking “EU convergence” bets that Hungary could join the Eurozone by the 2030s. Yields on 10‑year bonds fell from over 7 per cent to as low as 5 per cent in June, and the forint strengthened from near HUF400 to the euro to below HUF350.

Recent sell‑off driven by higher oil prices and a crowded trade pushed yields back to about 5.5 per cent and trimmed forint gains. Investors now watch Magyar’s fiscal plan to cut a 7 per cent GDP deficit below the 3 per cent Maastricht limit and the central bank’s move to lower its inflation target under 3 per cent.

Some funds remain bullish; Pro Meritum’s Pavel Mamai sees the yield spread versus German bonds narrowing further, while Aviva’s Nafez Zouk stresses credible fiscal consolidation is key. Citi’s Luis Costa warns much convergence is already priced in.