* Stocks drop, hitting currencies
* Romanian, Hungarian debt tenders come after midday
* Investors watching whether Romania sticks to yield cut-off
(Adds bond prices)
PRAGUE, July 15 (Reuters) - The Hungarian forint and
Romanian leu slipped on Thursday as stocks fell and investors
braced for government bond tenders due after midday.
Investors will be watching keenly to see whether Romania's
finance ministry sticks to a self-imposed cut off yield of 7
percent when it offers to sell 750 million lei in 9-month
treasury bills <BNR031>.
Since May, the ministry has been rejecting bids or selling
significantly less debt than planned, raising concerns over its
ability to finance its gaping budget deficit. []
To compensate for failed tenders, the ministry tapped the
money market earlier this week, borrowing 1.1 billion lei in
2-week deposits, and analysts have said resorting to such a
method again might hurt the leu currency.
"The market sort of expects the ministry to sell very little
and then have no choice but hold another depo auction," said one
trader in Bucharest.
The leu <EURRON=> and forint <EURHUF=> fell 0.2 percent to
bid at 4.26 and 278.6 to the euro. The Polish zloty <EURPLN=>
dipped a touch to 4.055 per euro and the Czech crown <EURCZK=>
inched up to 25.44 to the euro by 0844 GMT.
Stocks mostly fell and tracked western peers, with Budapest
<> down 0.2 percent while Prague <> and Warsaw <>
rose.
BOND AUCTIONS IN FOCUS
Debt auctions in the Czech Republic and Poland were mixed on
Wednesday, with poor demand hitting the Polish sale as
expectations of a rate hike this year build.
Polish bond yields were steady on Thursday, while Czech bond
yields edged up and found little relief in news the government
is looking at issuing a dollar bond as part of its foreign
issuance to meet record high borrowing in 2010. []
A regular auction of Hungarian government bonds will also
attract attention on Thursday, coming as the International
Monetary Fund and European Union hold talks with the new
centre-right government over the country's aid package.
[]
A business website reported on Wednesday the lenders want
the Hungarian government to declare that it is committed to
cutting the budget deficit below 3 percent of GDP next year.
"The end result of the talks will matter: if the IMF report
on this (2011 budget) is negative, that could trigger forint
weakness -- but until then I don't think this will have a
significant impact (on the market)," the dealer said.
The Czechs and Poles have found it easier to sell debt than
Hungary or Romania, both receiving IMF/EU aid.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.44 25.459 +0.07% +3.45%
Polish zloty <EURPLN=> 4.057 4.055 -0.05% +1.16%
Hungarian forint <EURHUF=> 278.6 277.98 -0.22% -2.96%
Croatian kuna <EURHRK=> 7.214 7.214 0% +1.32%
Romanian leu <EURRON=> 4.26 4.251 -0.21% -0.53%
Serbian dinar <EURRSD=> 104.53 103.957 -0.55% -8.28%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -3 basis points to 107bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +123bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +137bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +396bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +376bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +315bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1045 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Ruth Pitchford)
