* Forint falls to 1-yr low, other FX follow
* Banking stocks hard hit, Hungary bond yields surge
* U.S payrolls data,euro added fuel to CEE units' falls
(Updates throughout)
By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, June 4 (Reuters) - Government warnings that
Hungary's finances were worse than thought and could lead to a
Greek-style crisis sent central Europe's banking stocks sharply
lower on Friday, while pushing the forint to a one-year low.
Hungary's biggest bank OTP<OTPB.BU> fell up to 15 percent
and government bond yields shot up to nine-month highs after the
prime minister's spokesman appeared to back the view that his
country had a slim chance of avoiding a Greek-style debt crisis.
Analysts said continuing Hungarian market jitters could
affect other markets in the region but there was no threat of a
regional contagion from concerns over Hungary's debt.
"I'm not particularly concerned over that," said Timothy Ash
of RBS. "Hungary is really the only country in the region which
has public sector debt sustainability questions ... public debt
to GDP ratios are much lower elsewhere in the region."
The Hungarian comments unnerved investors and came at a time
of already rising global risk aversion after comments by the
French prime minister that sent the euro to a four-year low
against the dollar and weaker-than-expected U.S. jobs data.
[]
But analysts mostly said Hungarian officials' comparisons of
the country with Greece -- whose debt crisis this year made it
the first euro zone member to seek outside aid -- were off base
and that the country was in far better shape today than in
late-2008 when it sought international aid.
They also said that while the worries over Hungary should
blow over quickly, the new centre-right Fidesz government that
swept to power in April was taking a risk with posturing that
was likely only for domestic voters
"Fidesz is playing a dangerous game and risk pushing the
market too far, squandering a perfect inheritance from the
previous government," said Peter Attard Montalto, emerging
markets economist at Nomura International.
The forint <EURHUF=> fell more than 2 percent on Friday but
was off its lows at 1442 GMT to bid at 285.37 against the euro,
weaker by 1.5 percent. Bond yields surged some 40-70 basis
points and five-year credit default swaps (CDS) rose 100 basis
points from Thursday's close to around 430 basis points.
Poland's zloty <EURPLN=> fell 1 percent, and the Czech crown
<EURCZK=> was down 0.5 percent against the euro. Romania's leu
<EURRON> also weakened half a percent.
Stocks dropped 3-6 percent in the region, pulled down by
banking losses. Austrian banks Erste Group <ERST.VI> and
Raiffeisen International <RIBH.VI>, both heavily exposed to
lending in central Europe, dropped 6-8 percent in Vienna.
POLITICS
Hungarian Prime Minister Viktor Orban's spokesman said on
Friday another official was not exaggerating when he said on
Thursday that the country had a slim chance of avoiding a
Greek-style debt crisis. []
"The claim that the country is on a brink of sovereign
default and risks following the Greek path does not hold up
against the facts," Goldman Sachs wrote.
"Hungary has already faced a crisis and asked for IMF and EU
assistance in late-2008. In this context, Hungary is some 18
months ahead of Greece."
Hungary was forced to seek a $25 billion international aid
package at the start of the financial crisis in October 2008,
putting it under strict fiscal conditions.
The European Commission on Thursday urged Hungary to cut its
budget deficit faster, while government officials in Hungary
reiterated the 2010 fiscal gap may reach almost twice the target
agreed with the country's lenders including the EU.
In Romania, investors are watching for an upcoming vote of
confidence in the government over IMF-backed cost cutting
measures.
Despite lower debt loads, central Europe has come under
pressure in the past two months over worries about the euro
zone. Countries like Hungary and the Czech Republic export
heavily to the euro zone, and investors fear upcoming austerity
measures could squeeze growth.
The Czech centre-right won an election last weekend with
austerity pledges and warnings leftist spending promises would
lead to a Greek-style debt trap. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.928 25.805 -0.47% +1.5%
Polish zloty <EURPLN=> 4.158 4.117 -0.99% -1.3%
Hungarian forint <EURHUF=> 285.37 281 -1.53% -5.26%
Croatian kuna <EURHRK=> 7.259 7.259 0% +0.69%
Romanian leu <EURRON=> 4.205 4.197 -0.19% +0.77%
Serbian dinar <EURRSD=> 103.13 102.64 -0.48% -7.03%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +9 basis points to 146bps over bmk*
7-yr T-bond CZ7YT=RR +13 basis points to +169bps over bmk*
10-yr T-bond CZ9YT=RR +15 basis points to +159bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +9 basis points to +423bps over bmk*
5-yr T-bond PL5YT=RR +18 basis points to +392bps over bmk*
10-yr T-bond PL10YT=RR +13 basis points to +324bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +46 basis points to +650bps over bmk*
5-yr T-bond HU5YT=RR +81 basis points to +642bps over bmk*
10-yr T-bond HU10YT=RR +48 basis points to +551bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1509 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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[]
(Reporting by Reuters buros, writing by Sandor Peto and
Dagmara Leszkowicz; Editing by Jason Webb)
