UPDATE 1-Hungary "not far" from agreement with IMF -PM


* Further progress expected after IMF meetings in Tokyo end

* Forint, CDS, bond yields lower as markets expect deal soon

(Adds detail)

BUDAPEST, Oct 12 (Reuters) - Hungary is close to anagreement with the International Monetary Fund on setting up afinancial safety net, Prime Minister Viktor Orban said onFriday.

Central Europe's most indebted nation, which has not tappedinternational debt markets this year, needs the measure to curbits high borrowing costs and rebuild market confidence hurt byyears of unorthodox economic policies.

"There is a good chance. We are not far from a goodagreement," Orban told radio station MR1-Kossuth in an interviewin response to a question about the prospects of a financingdeal Budapest first requested nearly a year ago.

Orban said further progress in the talks could be made afterthe IMF concludes its annual meetings in Tokyo.

Orban said pressure on Hungary to secure a deal at all costshad abated and confidence in the country had strengthenedrecently. Some market participants believe Hungary is playingfor time in the talks.

Earlier this week Orban said the issue of whether or notHungary secures an agreement with the IMF and the European Unionon a multi-billion euro loan to bolster its shirking economywould be determined by the first quarter of next year.

After a preliminary leg of talks on July, Hungary moved astep closer to an agreement last week by abandoning a plannedtax on its central bank and flagging new budget cuts worth 397billion forints ($1.83 billion) next year to keep its deficitunder control.

Market optimism that a deal may be near curbed yields on thegovernment's "junk-rated" bonds below 7 percent on shortermaturities while the cost of insuring Hungary's debt against adefault fell to levels last seen in July 2011 this week.

Earlier this week Fitch Ratings warned Hungary not to gowithout IMF support.

($1 = 217.4959 Hungarian forints)

(Reporting by Gergely Szakacs; Editing by Andrew Heavens)

((gergely.szakacs@thomsonreuters.com)(+36 1 327 4748)(ReutersMessaging: gergely.szakacs.thomsonreuters.com@reuters.net))

Keywords: HUNGARY IMF/