* CEE fx, bonds retreat on fiscal concerns, zloty resilient
* Hungary bonds, forint fall on govt party official comments
* Romania rejects all bids at tender
(Recasts with market falls, new comments)
By Sandor Peto
BUDAPEST, June 3 (Reuters) - Central European government
bonds and currencies retreated on Thursday as an unsuccessful
Romanian bond auction and comments from Hungarian officials
reminded about uncertainty over state budgets in the region.
Stock markets remained firmer and the zloty of Poland, the
region's most robust economy, also bucked the trend as markets
remained closed there for a national holiday.
Hungarian bond yields jumped around 30 basis points, with
3-year bonds sold around 6.60 percent after Lajos Kosa, vice
president of the ruling Fidesz party said that the new
government would start a two-year crisis management programme.
[]
Hungary's forint <EURHUF=> also gave up early gains and was
0.8 percent weaker against the euro at 1404 GMT to 277.50, while
Romania's leu <EURRON=> eased 0.1 percent.
The gains of the Czech crown <EURCZK=> narrowed to 0.1
percent from 0.4 percent in morning trade, while the zloty
firmed 0.8 percent, retaining almost all of its early gains.
Dealers said Kosa's words hit domestic markets hard mainly
because he also said that Hungary had a slim chance to avoid a
Greek-style scenario as its budget was in a much worse shape
than expected. []
The finances of Central European states are generally
thought to be in better shape than the budgets of states in the
euro zone periphery.
But Hungary's debt at 80 percent of GDP is the highest in
the region and another official reiterated later that the 2010
budget deficit could be twice the 3.8 percent target agreed by
the previous government with lenders. []
Separately, European Commission President Jose Barroso said
Hungary should strive to meet its deficit targets.
[] The new government has not put down a credible
economic plan yet.
"The new government's communication is not enough refined
and coordinated," one Budapest-based fixed income trader said.
A currency dealer said that "I wait for the government's
concrete plans, and I'm not alone in the market."
ROMANIA'S AUCTION FAILS
Hungary slightly cut its government bond sales at its
auctions earlier in the day []. Romania rejected
all bids at a bond tender again, another reminder that fiscal
policy concerns are returning into the limelight in the region.
Romania's government plans to present tough austerity
measures to parliament on Monday, key for a financing deal with
the International Monetary Fund and to investor confidence.
Parliament will hold a confidence vote next week, and the
country's powerful trade unions have opposed the measures.
Czech assets could get support from hopes for fiscal reforms
though local yields are the lowest in the region, analysts said.
Earlier in the week markets had cheered the centre-right's
election victory with the crown <EURCZK=> scoring its biggest
gain in a year on Monday, bringing it below 25.5 per euro.
Civic Democrat leader Petr Necas, the next likely prime
minister, met with President Vaclav Klaus on Thursday to update
him on his party's progress in reaching a coalition agreement
with two other centre-right parties. Klaus has not officially
named someone to form the next government.
The market rally has sputtered [] but analysts
in a Reuters poll projected that the crown could gain five
percent against the euro in the next 12 months from Wednesday's
close, while the zloty could firm nine percent. []
The currencies of Romania and Hungary -- states with weaker
fundamentals and IMF loan agreements -- are unlikely to return
to highs reached earlier this year in the next 12 months, but
are expected to firm by 3 and 5 percent, respectively.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.76 25.775 +0.06% +2.17%
Polish zloty <EURPLN=> 4.076 4.1 +0.59% +0.69%
Hungarian forint <EURHUF=> 277.5 275.24 -0.81% -2.58%
Croatian kuna <EURHRK=> 7.259 7.259 0% +0.69%
Romanian leu <EURRON=> 4.19 4.185 -0.12% +1.13%
Serbian dinar <EURRSD=> 102.78 102.37 -0.4% -6.71%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 135bps over bmk*
7-yr T-bond CZ7YT=RR -8 basis points to +153bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +143bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +28 basis points to +591bps over bmk*
5-yr T-bond HU5YT=RR +27 basis points to +560bps over bmk*
10-yr T-bond HU10YT=RR +32 basis points to +502bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1604 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Krisztina Than/Marton Dunai/Sandor Peto;
editing by Jason Webb and Susan Fenton)
