* Forint, stocks, bonds hammered
* Other CEE assets gain back some morning losses
* Hungary's c.bank meets on interest rates
* Romania tenders 750 mln lei in one-year t-bills
(Updates throughout)
By Marius Zaharia
BUCHAREST, July 19 (Reuters) - Hungarian assets plunged on
Monday after funding talks with international lenders ended
prematurely over the weekend, but contagion risks for other
central European assets were seen muted for the time being.
The forint <EURHUF=> fell 2.2 percent from Friday's close by
1008 GMT at 288 per euro. Regional currencies tracked its
decline in overnight trade, but recovered much of the losses
later in the day.
Hungarian bond yields rose 20-30 basis points across the
curve, while Budapest stocks <> were down 2.4 percent.
Dealers say central European assets are decoupling from
Hungary's problems as Poland and the Czech Republic have sounder
economic fundamentals than Hungary and Romania, while the latter
has overcome significant hurdles to keep its own deal with the
International Monetary Fund on track.
Yields on Hungary's Eurobond maturing June 2011
<HU013159386=RRPS> shot up to the highest since June last year,
while five-year CDS spreads rose 38 basis points, according to
Markit data.
Elsewhere, the Polish zloty <EURPLN=> was down 0.3 percent,
trading at 4.12 per euro, significantly off overnight lows of
4.1540. The Romanian leu <EURRON=> and the Czech crown <EURCZK=>
were 0.1-0.2 percent weaker.
"There are some contagion risks especially to Romania and
Bulgaria via the banking sector, but for now it seems pretty
contained," said Danske Bank's Lars Christensen.
"Furthermore, unlike the Hungarian government, the Romanian
government has gone out of its way to deliver on the promised
fiscal tightening. The IMF and the EU will recognise this and
therefore also go out of their way to protect Romania from any
possible contagion."
Cheuvreux's Simon Quijano-Evans also noted that central
banks in the region had significant ammunition to intervene in
the currency markets to prevent and fight any sharp falls.
RATES STILL SEEN FLAT
Hungary's central bank (NBH) holds a meeting on interest
rates later on Monday and it is still seen keeping borrowing
costs on hold at 5.25 percent, while economists say it may use
other tools like FX intervention to help the forint.
"We are looking to sell EUR/HUF on exaggerated moves (target
around 295)," UniCredit said in a note. "In case of escalated
moves we would not fully rule out some form of central bank
intervention."
Hungary faces no immediate pressure on state finances and
its 2010 position looks safe, but economists agree it needs to
keep the deal led by the International Monetary Fund on track as
an external anchor of credibility.
An immediate risk from the suspension of Hungary's talks
with the IMF and the European Union at the weekend was
depreciation against the Swiss franc, also seen in the zloty.
While currency depreciation against the euro have helped
Hungary tame a recession and Poland avoid one, weakening against
the Swiss franc has caused big pain for these countries as a
large chunk of household loans taken when those economies were
booming were denominated in francs.
On Monday, the forint fell more than 3 percent against the
Swiss france <CHFHUF=> from Friday to 211.6, while the zloty was
quoted 0.6 percent weaker at 3.0362 <CHFPLN=>.
Cheuvreux noted the forint was now around 38 percent weaker
than levels at which many mortgage loans were taken.
Investors are also eyeing Romania's tender to sell 750
million lei in one-year treasury bills later on Monday.
The finance ministry has either rejected all bids or cut
tenders across maturities since early May, when investors began
demanding higher yields in response to the government's growing
difficulties in securing vital aid tranches from the IMF.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.478 25.432 -0.18% +3.3%
Polish zloty <EURPLN=> 4.12 4.106 -0.34% -0.39%
Hungarian forint <EURHUF=> 288 281.54 -2.24% -6.13%
Croatian kuna <EURHRK=> 7.21 7.225 +0.21% +1.38%
Romanian leu <EURRON=> 4.271 4.265 -0.14% -0.79%
Serbian dinar <EURRSD=> 104.79 104.61 -0.17% -8.5%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -8 basis points to 99bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +127bps over bmk*
10-yr T-bond CZ9YT=RR -1 basis points to +141bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -7 basis points to +389bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +378bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +321bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +27 basis points to +620bps over bmk*
5-yr T-bond HU5YT=RR +23 basis points to +586bps over bmk*
10-yr T-bond HU10YT=RR +18 basis points to +493bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1008 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia,
Editing by John Stonestreet/Susan Fenton)
