* Crown, forint take poor data in stride
* Hungarian, Czech yields drop, Hungary 3-yr bond seen a buy
* Polish bonds stabilise after budget blow-out
(Adds bonds)
By Jason Hovet and Krisztina Than
PRAGUE/BUDAPEST, Sept 8 (Reuters) - Hungary's forint and the
Czech crown mostly shrugged off data on Tuesday that showed how
slow economic recovery would be in these countries, while bond
yields dropped, helped by their currencies' resilience.
Some strategists have started getting more bearish on the
Czech currency, with Danske Bank recommending going long Polish
zloty against the Czech unit due to better economic prospects
and improving sentiment toward riskier assets. []
"PLN/CZK is slightly positively correlated with global risk
appetite, and is thus anchored to our expectation of a continued
economic recovery in the global economy in the coming months,"
Danske wrote in a note. "However, if market sentiment turns more
sour this would pose a risk for this trade."
A string of GDP and output data from the region highlighted
how fragile the recovery is likely to be [].
In the Czech Republic, the economy fell a more-than-expected
5.5 percent year-on-year in the second quarter, although it grew
0.1 percent from the previous quarter to crawl out of recession.
[]
Hungary's economy contracted 7.5 percent year-on-year in the
second quarter, better than earlier estimates, although July's
industrial output was worse than expected, shedding an annual
19.4 percent after a modest June slowdown. []
The forint <EURHUF=> crept up 0.4 percent to 270.7 per euro,
and the Czech crown <EURCZK=> was a shade lower to bid at 25.5
to the euro after modest gains on Monday.
Stock markets in central Europe, which rose around 2 percent
on Monday following a meeting of G20 leaders over the weekend,
extended gains, with all up 0.2-1.0 percent.
"Sentiment is very bullish again but I would continue to
think that this will be temporary," a Budapest-based currency
dealer said, adding the Hungarian central bank was expected to
cut interest rates again later this month after two rate cuts in
July and August.
"There was some firming in the forint ... which trickled
down into the bond market. But turnover is incredibly low," a
fixed income trader added.
Erste Group recommended buying 3-year Hungarian government
bonds in a note on Tuesday.
"Intensifying expectations for more rate reductions could
make the current levels of bond yields attractive. We think that
there is still potential for bond investors to enter the market.
Our yield target for the 3Y bond is 7 percent," it said.
The 3-year bond traded at around 7.80 percent on Tuesday.
YIELDS EDGE LOWER
Hungarian yields edged about 1-3 basis points lower in a
thin market. Czech yields also headed down, mainly on the
short-end of the curve after the steeper-than-forecast
year-on-year fall in Q2 GDP, with the 3-year <CZ3YT=RR> down
around 8 basis points to quote at 3.479/3.136 percent.
Money market rates have also continued to correct after
jumping in the past month on some speculation when a rate hike
could come, although dealers said today's data reinforced the
view that rates may stay put for longer.
"The curve had jumped quite a lot and it was a little bit
unrealistic... so now we are moving down and today's numbers
probably multiplied the effect," said Dalimil Vyskovsky, fixed
income dealer at Komercni Banka.
Poland's zloty <EURPLN=> edged up 0.2 percent to recoup some
losses after markets absorbed weekend news the government's 2010
budget gap would likely double, which had pushed bond yields up
7 basis points. []
Markets were looking to Wednesday's 5-year bond tender, where
analysts said the government may have to accept lower prices.
Central Europe's governments have seen budgets deteriorate
with rising unemployment and lower revenue as the region's
export-reliant economies are punished by sinking demand for
their cars and electronics in the global downturn.
In Romania, which like Hungary has secured external financial
aid to get through the economic crisis, adjusted industrial
output was flat on the month in July and showed a 6.9 percent
fall year-on-year, an improvement on the previous month's data.
The leu <EURRON=> was steady from Monday's local close.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.5 25.473 -0.11% +4.91%
Polish zloty <EURPLN=> 4.09 4.1 +0.24% +0.61%
Hungarian forint <EURHUF=> 270.7 271.87 +0.43% -2.64%
Croatian kuna <EURHRK=> 7.338 7.328 -0.14% +0.37%
Romanian leu <EURRON=> 4.239 4.241 +0.05% -5.3%
Serbian dinar <EURRSD=> 93.13 93.11 -0.02% -3.92%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -7 basis points to 195bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +183bps over bmk*
10-yr T-bond CZ10YT=RR -3 basis points to +183bps over
bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +627bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +571bps over bmk*
10-yr T-bond HU10YT=RR -3 basis points to +484bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1531 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 and
Krisztina Than, editing by Stephen Nisbet)
