* Crown falls less than peers as mkts cheer election result
* Czechs to pick up borrowing pace in Q3, yields edge higher
* Hungary bond yields up as key rate left flat on Monday
(Adds bonds, stocks, Czech PMI)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, June 1 (Reuters) - The Czech crown fell
less than peers on Tuesday, helped by a decisive centre-right
election victory over the weekend, while Hungarian bond yields
rose in reaction to Monday's decision to leave rates flat.
Central European markets were hit by bearish sentiment over
growth and debt in Europe on Tuesday, and regional stocks
followed their global peers and fell up to 3.5 percent.
UK and U.S. markets re-open on Tuesday after a long weekend
and many traders said investors were pricing in a ratings
downgrade on Spain from Friday.
At 0923 GMT, the Polish zloty <EURPLN=> traded 1.1 percent
lower, Hungary's forint <EURHUF=> was 0.7 percent down, while
Romania's leu <EURRON=> remained decoupled from regional peers
and traded flat in thin trade, just below 4.2 per euro where
dealers expect the central bank to intervene.
The crown <EURCZK=> fell 0.5 percent. That compared to a 1.5
percent gain on Monday after election results convinced markets
a stable and fiscally prudent government was likely to result.
Czech right-wing parties reached broad agreement on Monday
on government priorities, but said building a coalition would
require tough talks with a third centrist party. []
Public Affairs party manager Vit Barta was cited as saying
on Tuesday there was still an option the party would not join a
coalition with the Civic Democrats and TOP09, but would support
it in parliament.
A possible centre-right coalition could be the strongest in
18 years in a country that has not had a stable government in
the past decade, causing it to lag its neighbours in reforms.
Analysts say the crown could attack this year's high of
25.015 to the euro if coalition talks go smoothly.
"We expect further appreciation down to a low of 25.00
unless global sentiment shifts," an SEB trade note said. "A more
prudent approach to selling (euros for crowns) could be to buy
(crowns against the forint)."
YIELDS TICK UP
Hungary's bond yields rose about 10 basis points in reaction
to the central bank's decision to leave interest rates unchanged
at a record low of 5.25 percent on Monday, while raising its
end-year inflation forecast [].
Czech bonds also edged up after the government announced a
ramped-up third quarter supply calendar, picking up the pace of
issuance to meet record borrowing needs this year.
[]
The benchmark 2019 bond <CZ1002471=> yield rose 3 basis
points to 4.04 percent after the calendar release.
Markets were also looking at manufacturing growth indicators
in Europe after China's purchasing managers' index (PMI) fell in
May. []
Czech PMI edged up to its highest level since August 2007,
but the rise was the smallest in five months. []
Polish PMI slipped a touch in May to 52.2 points but still
showed growth ahead. Hungary PMI, calculated differently from
Polish or Czech PMI, dropped below the 50 mark that divides
growth from contraction. [] []
The figures highlighted the region's dependence on the
economy of the euro zone, its main trading partner.
"After recent positive growth data sparked revisions of
growth forecasts higher, we probably have all the good news
priced in and new figures will not be so promising," said Gyorgy
Barcza from K&H Bank.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.636 25.499 -0.53% +2.66%
Polish zloty <EURPLN=> 4.116 4.072 -1.07% -0.29%
Hungarian forint <EURHUF=> 276.52 274.49 -0.73% -2.23%
Croatian kuna <EURHRK=> 7.259 7.259 0% +0.69%
Romanian leu <EURRON=> 4.189 4.191 +0.05% +1.16%
Serbian dinar <EURRSD=> 102.44 102.43 -0.01% -6.4%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +13 basis points to 139bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +161bps over bmk*
10-yr T-bond CZ9YT=RR +10 basis points to +146bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +14 basis points to +569bps over bmk*
5-yr T-bond HU5YT=RR +17 basis points to +536bps over bmk*
10-yr T-bond HU10YT=RR +17 basis points to +476bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1223 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
Marius Zaharia; editing by Stephen Nisbet)
