* First Hungary debt auction since IMF talks breakdown
* Bond auction results due at 0930 GMT
* Zloty seen hovering around 4.00/euro, crown off highs
(Adds bond yields)
By Jason Hovet
PRAGUE, July 29 (Reuters) - Hungary's forint fell in early
trade on Thursday, with investors nervous ahead of Budapest's
first bond sale since talks with the IMF collapsed, prompting a
series of warnings on its credit rating.
Prime Minister Viktor Orban said on Wednesday the country
could see its rating cut, adding to a string of unsettling signs
from Hungary whose impact has been eased by improved investor
appetite for risk assets. []
More bullish growth hopes helped push Poland's zloty past
the key 4.00 per euro level while the Czech crown retreated only
slightly from a 20-month peak hit in the previous session.
Stock markets rose, following western peers up after
improving company earnings from the second quarter, and adding
support to currencies.
Dealers expected positive sentiment towards emerging market
assets will help Hungary's debt sale.
"After the (midday) auction the gauge of appetite for
Hungarian assets will be more on the mark," a Budapest dealer
said.
"Recent government comments have been mixed. Some were
positive, but others, like the prime minister's comments from
yesterday, are just asking for trouble."
Bond markets were quiet before the tender results. Yields
have fallen around 20 basis points after a jump last week.
The forint <EURHUF=> dipped 0.3 percent to 283.34 to the
euro by 0900 GMT. The zloty <EURPLN=> led gainers with a 0.1
percent rise along with Romania's leu <EURRON=>.
The crown <EURCZK=>, CEE's best performer this year, slipped
0.1 percent to 24.722 per euro in slight profit-taking.
BULL RUN
Strategists have become more bullish on the crown after
improving economic data at home and in trade partner Germany. A
new centre-right government has also strengthened the country's
appeal to investors by keeping to budget tightening.
"The Czech crown undoubtedly is the EMEA currency that we
are most bullish on -- both short-term and long-term," Danske
Bank said in a note.
"We believe this is fully justified given relatively strong
Czech fundamentals and optimism about Czech economic reforms."
The crown broke below the 25 per euro level for the first
time since September 2009 on Wednesday, pushing it past
technical barriers.
The 25 rate was also a level that central bank policymakers
had verbally intervened against in the past to protect export
strength, and analysts said there was still a risk they could
speak out before an Aug. 5 policy meeting expected to keep
interest rates on hold at a record low of 0.75 percent.
Hungarian assets have mostly held their ground during the
new government's standoff with the International Monetary Fund
-- but analysts said that leaves plenty of scope for a bigger
selloff if resistance to an IMF deal persists. []
Romania, another aid recipient, sold 1.2 billion euros
($1.56 billion) in one-year treasury bills on Wednesday, three
times the planned amount, with the average accepted yield
rising 65 basis points. []
Polish bond yields edged higher by up to 2 basis points with
analysts awaiting the expected release this week of the
government's deficit reduction plans.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.722 24.694 -0.11% +6.46%
Polish zloty <EURPLN=> 3.997 4.001 +0.1% +2.68%
Hungarian forint <EURHUF=> 283.34 282.51 -0.29% -4.58%
Croatian kuna <EURHRK=> 7.243 7.243 0% +0.91%
Romanian leu <EURRON=> 4.25 4.252 +0.05% -0.3%
Serbian dinar <EURRSD=> 106.18 106.17 -0.01% -9.7%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +12 basis points to 95bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +92bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +106bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +387bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +361bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +308bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1101 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)
