* Region benefits from improved global sentiment
* Forint stable, but remains vulnerable
(Adds debt markets, detail)
By Marius Zaharia
BUCHAREST, July 21 (Reuters) - Hungary's forint was roughly
stable on Wednesday as central European currencies benefited
from better risk appetite, but odds were still on more weakness
after a sell-off sparked by a halt in talks with the IMF.
The forint lost more than 3 percent after the weekend
suspension of talks aimed to renew its 20 billion euro aid deal.
It recovered almost one percent on Tuesday on the back of gains
for global stocks and a firmer euro, but some dealers said
investors still looked to be positioned for more weakness.
"Foreign investors are targeting the forint towards 300,"
one dealer said. "But many of them were probably positioned long
EURHUF at 278-280 and they've unwound those positions at 290,
which gives the impression of calmer markets."
"In fact they're waiting for the forint to firm maybe
towards 285.25/50 and build new positions to offload at 294 ...
and they do the same again aiming for 298. This could happen
over a week."
At 0943 GMT, the forint <EURHUF=> was virtually flat on the
day, trading at 286.64 per euro. The Czech crown <EURCZK=>, the
Romanian leu <EURRON=> and the Polish zloty <EURPLN=> were also
stable to a touch firmer.
"I expect the forint to remain steady or perhaps weaken
somewhat today ... basically it was the good equity mood which
lifted it," a currency dealer in Budapest said.
Hungary has pledged to stick with its fiscal targets and
analysts say it is still likely it will come to terms with the
IMF, possibly after local elections in early October.
The ruling Fidesz party's vice chairman Lajos Kosa said on
Wednesday that the Fund's expectations for Hungary to cut its
deficit to 2.8 percent of GDP next year from a target of 3.8
percent in 2010 was too strict [].
TENDERS EYED
Hungarian bond yields were up to 10 basis points lower after
climbing 20-30 basis points on Monday, but dealers said there
was no shift in broader sentiment.
"Looks like the market does not believe there is genuine
trouble, but they are short of trusting us yet," a fixed income
trader in Budapest said. "(There is) a bit of strengthening, but
no bull by any means."
In the Czech Republic, the focus was on a 9-year bond sale
at noon. The finance ministry is offering a relatively hefty 8
billion crowns but traders said they expected solid demand,
which may prompt the ministry to raise the volume.
The yield of the 5.0/19 bond <CZ9YT=RR> <CZ1002471=> was
3.87 percent at 0706 GMT, its lowest level since late May.
Yields in Polish bonds inched down on Wednesday ahead of a
bond switch auction at 1000 GMT that dealers said would be a
test for investor sentiment.
"The switch tender will be quite interesting. It will show
how strong is the sentiment after this poor tender last week," a
Warsaw-based fixed income trader said.
At a bond auction on July 14 yield of the 5-year PS0415
papers was 23 basis points above the one achieved during a
previous tender in May.
In Romania, which has recently hiked the value added tax and
cut public sector wages by a quarter, economic forecasts
continued to worsen. Economy Minister Adriean Videanu said the
IMF expected the economy to contract by 0.5 percent next year,
revised from a previous 3.6 percent. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.37 25.351 -0.07% +3.74%
Polish zloty <EURPLN=> 4.114 4.115 +0.02% -0.24%
Hungarian forint <EURHUF=> 286.64 286.75 +0.04% -5.68%
Croatian kuna <EURHRK=> 7.222 7.236 +0.19% +1.21%
Romanian leu <EURRON=> 4.268 4.271 +0.07% -0.72%
Serbian dinar <EURRSD=> 104.94 104.867 -0.07% -8.63%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +11 basis points to 102bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +120bps over bmk*
10-yr T-bond CZ9YT=RR -6 basis points to +134bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +399bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +378bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +324bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -6 basis points to +621bps over bmk*
5-yr T-bond HU5YT=RR -8 basis points to +580bps over bmk*
10-yr T-bond HU10YT=RR -12 basis points to +480bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1044 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
All data taken from Reuters at 0843 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia;
editing by Patrick Graham)
