Investors hunting yield in European sovereign debt are increasingly targeting
Eastern Europe—notably Bulgaria, Hungary and Lithuania—on improved economic and
fiscal metrics and relatively higher yields versus Western peers. Political
transitions and prospects of euro adoption, subject to Brussels’ strict entry
conditions, add to the case. Key risks include local-currency volatility,
shallow secondary-market liquidity, outsized exposure to pan-European debt and
energy shocks (notably for landlocked Hungary) and persistently high debt and
deficits across parts of the region.
