* Forint leads losses, currencies feel global risk aversion
* Bonds withstand pressure, upside seen
(Adds bonds, updates market)
By Marton Dunai
BUDAPEST, July 8 (Reuters) - Regional currencies steadied on
Wednesday after overnight losses due to a continuing global
flight from risky assets, which pushed the zloty and the forint
past key technical levels but left bonds largely unaffected.
"Recovery hopes went too far, so people began cutting their
positions on emerging (assets)," a dealer said. "The fall is
also technical, since the zloty broke the 4.4 support level and
the forint broke 275."
Hungarian and Polish stock markets also opened in negative
territory, while the Prague bourse was flat.
The forint led losses, easing about 1.25 percent to the euro
from Tuesday's domestic close. The zloty shed 0.6 percent, and
the crown about half a percent at 0917 GMT.
"The sky is getting darker," a Budapest-based dealer said.
"This is not a correction. The crisis feeling is coming back."
The zloty got stuck at a lower level despite Poland's
finance minister saying the Polish currency had stabilised and
there was no need for direct conversion of EU funds.
[]
Analysts said 4.45 was a next key level for the Polish
currency, likely to find itself under pressure from weak
corporate results and losses in other currencies.
"As in previous weeks, the situation of the zloty will be
mostly determined by global sentiment and developments on
(global) stock exchanges," BPH bank said in its morning note.
In Romania, the leu shrugged off news that the International
Monetary Fund will revise downwards its 4 percent forecast of
economic contraction in Romania this year. []
BOND DEMAND STRONG
Yields on Poland's bond market remained stable ahead of
Wednesday tender, which will show investors' appetite for the
government securities.
"Sentiment on the bond market remains positive despite the
zloty weakening and falling equity markets," said Remigiusz
Zalewski, a bond dealer at DI BRE.
Poland's $2bn bond issue this week, oversubscribed fourfold,
serves to indicate a healthier market, UniCredit analyst Martin
Blum said in a note.
"(The bond issue) is clearly a positive for sovereign credit
and more broadly bolster the funding backdrop," Blum wrote.
"...as long as the MoF doesn't start issuing especially cheap
eurobonds from here on in, yesterday's stellar issue could
arguably serve as a positive for local currency markets, once
risk appetite stabilises."
Hungary's bond market also remained stable despite the
forint's weakness, but that reflects a lack of supply rather
than organic demand for the assets, local dealers said.
"The Hungarian market has had the living daylights squeezed
out of it," one dealer said. "Supply is supertight, and unless
the (state debt management agency) AKK increases auctions to the
60-100 billion forint range, we will remain on life support."
Hungary recently restarted bond auctions after a six-month
hiatus, and sold 42 billion forints worth of bonds in a heavily
oversubscribed tender last week.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.035 25.92 -0.44% +2.76%
Polish zloty <EURPLN=> 4.417 4.389 -0.63% -6.84%
Hungarian forint <EURHUF=> 277.45 273.96 -1.26% -5.01%
Croatian kuna <EURHRK=> 7.339 7.335 -0.05% +0.35%
Romanian leu <EURRON=> 4.215 4.207 -0.19% -4.76%
Serbian dinar <EURRSD=> 92.38 92.497 +0.13% -3.14%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +26 basis points to +167bps over bmk*
4-yr T-bond CZ4YT=RR -29 basis points to +173bps over bmk*
8-yr T-bond CZ8YT=RR +11 basis points to +315bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +416bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +334bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +300bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -19 basis points to +780bps over bmk*
5-yr T-bond HU5YT=RR -57 basis points to +706bps over bmk*
10-yr T-bond HU10YT=RR -45 basis points to +594bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1118 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaux, writing by Marton Dunai)
