* Forint, bonds rebound as markets digest deficit plan
* Detail still lacking, short-term gains only expected
* Stocks mixed, Budapest's BUX stock index falls
* Other FX up; exports give boost to region's GDP
(Adds detail, fixed income)
By Dagmara Leszkowicz
WARSAW, June 9 (Reuters) - The forint rose on Wednesday
after investors took Hungary's deficit-cutting plan as a strong
step to contain swelling finances, but analysts said a lack of
details may make gains only short-lived.
Hungary's Prime Minister Viktor Orban told parliament on
Tuesday his government would introduce a flat income tax and a
levy on banks and cut some public sector pay to keep the budget
deficit at 3.8 pct of GDP, as agreed with foreign lenders.
Hungary is also banning mortgages in foreign currencies, a
key growth driver in recent years. []
Market watchers mostly welcomed the plan, although they said
the measures posed risks to the forint and to the overall
outlook in the longer-term for the country which sought a $25
billion IMF/EU aid package at the start of the financial crisis.
"It is not really the details of the plan that are so great,
especially that exact calculations are still unknown, but rather
confirmation ... that the government will aim to reach the
IMF/EU budget targets," analysts at ING wrote in a note.
"Yet since a firm reconfirmation of the (deficit at) 3.8
percent (of GDP) seems to be missing from the PM's speech,
slippage (of FX and bonds) cannot be ruled out."
By 0937 GMT the forint <EURHUF=> rose 0.3 percent to 280.9
against the euro, off its previous gains. Hungarian stocks were
down 0.6 percent, with the country's leading bank OTP <OTPB.BU>
falling some 1.1 percent.
Hungary's five-year credit default swaps (CDS) stood at
around 386, down from over 400 bps last week, their highest
level in 13 months.
Hungarian bonds slightly extended gains posted earlier in
the week, with the country's paper some 30-50 basis points lower
compared to peaks posted last week. The 10-year bond yield
dipped 7 basis points to 7.58 percent; dealers and analysts said
the yield will likely bottom around 7.5 percent.
"Bond yields are returning to the earlier levels (before
last week's surge)," one Budapest-based dealer said. "But
concerns can return any time. It's very easy to squander
confidence ... what has happened is not good for us at all."
HUNGARY STAGNATING
Other emerging Europe's units rose, with the Czech crown
<EURCZK=> up some 0.2 percent to the euro and the Polish zloty
<EURPLN=> rising 0.3 percent.
The Romanian leu <EURRON=> was flat to the euro and dealers
said investors were mostly on the sidelines before a government
no-confidence vote for proposed pay cuts next week, crucial to
Romania's own IMF-led aid package.
In Poland, the opposition leftists said they would back
former prime minister Marek Belka to be the next central bank's
governor, effectively securing his appointment.
Belka, an economist who heads the IMF's department for
Europe and is widely respected by financial markets, would
replace Governor Slawomir Skrzypek who died in a plane crash in
April along with President Lech Kaczynski. []
Hungary's statistics office data said earlier Hungary's
economy grew by an annual 0.1 percent in the first quarter, in
line with preliminary estimates. []
The economy is seen stagnating this year after a sharp
contraction in 2009, and analysts said some of the government
plans such as a new bank tax may hurt growth in the longer term
as it could weigh on lending activity.
The Czech stats office revised first-quarter quarterly
growth up to 0.5 percent, from the previous 0.2 percent.
[]
Analysts expect overall central European economic growth --
led by Poland -- to outpace that of the western EU this year,
though the pace is dependent on trade to the euro zone.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.945 25.994 +0.19% +1.44%
Polish zloty <EURPLN=> 4.123 4.137 +0.34% -0.46%
Hungarian forint <EURHUF=> 282.71 283.56 +0.3% -4.37%
Croatian kuna <EURHRK=> 7.239 7.242 +0.04% +0.97%
Romanian leu <EURRON=> 4.219 4.22 +0.02% +0.44%
Serbian dinar <EURRSD=> 103.69 103.73 +0.04% -7.53%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +4 basis points to 165bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +173bps over bmk*
10-yr T-bond CZ9YT=RR -1 basis points to +172bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +419bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +394bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +330bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -6 basis points to +619bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +591bps over bmk*
10-yr T-bond HU10YT=RR -7 basis points to +505bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1137 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz;
Editing by Jason Webb and Susan Fenton)
