Yields on Hungarian sovereign bonds soared and the forint dropped on Friday after Moody's downgraded Hungary's credit rating to non-investive status.
Traders said that investors were shunning Hungarian bonds and that domestic players were also absent from the market.
Yields on three-year, five-year and 10-year treasury bonds went up 0.6-0.8 percentage points to about 9.1-9.5 percent, Daniel Bebesy, portfolio manager at Budapest Fund Management, told the economy site portfolio.hu in late morning trading.
Earlier, yields on the same bonds stood between 8.51 and 8.98 percent, according to analysts at Intesa Sanpaolo's Hungarian unit.
Hungary's CDS spreads -- the cost of insurance against a default -- also rose 620 points from 510 in the beginning of November, coming close to all-time high of 640 points reached in October 2008, when Hungary first turned to international lenders for assistance to avert a default.
Hungary's currency meanwhile plummeted to 316.29 forints to the euro, from around 310 forints before the downgrade announcement late on Thursday.
The country's base interest rate, now at 6.0 percent, will likely be raised to protect the plunging forint, analysts warned. The central bank is to hold its next regular rate-setting meeting on November 29.
The state debt management agency AKK will also hold treasury bill auctions on November 28 and 29, with a treasury bond auction to follow on December 1.
Hungary's sovereign debt was downgraded by Moody's to junk status Thursday after 15 years in investment grade, despite Budapest's decision to approach the International Monetary Fund and European Union for help.
The government's U-turn on seeking international assistance was seen as a reaction to difficulties raising funds on the markets and the prospect of a debt rating cut to junk bond status, which makes borrowing even more difficult and expensive.
Rating agencies as well as foreign and local analysts warned against the unpredictability of the economic policies of Prime Minister Viktor Orban's centre-right government.
"We are going against traffic on the highway, our economic policy makers have lost their sense of reality," Bebesy commented.