* Hungary raises first bond sale since IMF talks broke down
* Forint regains some ground after auction
* Zloty hovers around 4.00/euro, crown off highs
(Adds Hungarian bond auctions.)
By Jason Hovet and Sandor Peto
PRAGUE/BUDAPEST, July 29 (Reuters) - Hungary's forint and
bonds rebounded on Thursday after the government lifted its
offer at its first bond auctions since its talks with the IMF
collapsed, prompting a series of warnings on its credit rating.
While plenty of risks remain over Hungary's fiscal policy
and debt financing, a rise in risk appetite buoys the country's
assets which have significantly underperformed the region since
the talks broke down on July 17, traders and analysts said.
The Czech crown <EURCZK=> and the Polish zloty <EURPLN=>
hovered near key levels crossed earlier this week after a rally
in the past weeks. Stocks in the region rose after some retreat
on Wednesday, tracking other emerging markets. []
Hungary sold 57.5 billion forints worth of bonds at its
auctions, 7.5 billion forints more than planned, and the average
yields dropped on five- and 15-year bonds as the debt agency AKK
raised its offer on those maturities. []
Hungarian government bond yields dropped by 10 basis points
in the secondary market from Wednesday and the bonds traded near
the average auction yields after the primary sale.
The forint <EURHF=> gained 0.2 percent against the euro
after the auction but remained 0.3 percent weaker from
Wednesday's close.
The Hungarian unit has recovered by several percentage
points since big losses in the wake of the collapse of IMF/EU
talks earlier this month. Bond yields have also dropped by up to
50 basis points, mainly at the long end of the curve.
Analysts warned, however, that despite a tighter 2010 budget
deficit goal than most other European countries, Hungary faced
longer-term financing risks [].
The good auction results may also reflect expectations that
the government would agree with international lenders after
municipal elections in October, some market participants said.
"True, the (credit) ratings outlooks are negative but this
(threat) can also pass in the autumn. Whoever bought the bonds
thought of these things," one Budapest-based trader said.
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. []
ZLOTY, CROWN AROUND KEY LEVELS
The zloty was bid at 4.002 to the euro, continuing to hover
around the 4.0 technical and psychological level. The crown
stayed on the firmer side of the key 25.0 level which it broke
through on Wednesday, though it was slightly down from 20-month
highs hit on Wednesday and weaker by 0.1 percent from its close.
The Romanian leu<EURRON=> also eased 0.1 percent to 4.258.
More bullish growth hopes helped push Poland's zloty past
the key 4.00 per euro level earlier this week.
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 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.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.714 24.694 -0.08% +6.49%
Polish zloty <EURPLN=> 4.002 4.001 -0.02% +2.55%
Hungarian forint <EURHUF=> 283.35 282.51 -0.3% -4.59%
Croatian kuna <EURHRK=> 7.245 7.243 -0.03% +0.89%
Romanian leu <EURRON=> 4.258 4.252 -0.14% -0.48%
Serbian dinar <EURRSD=> 105.917 106.17 +0.24% -9.48%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +9 basis points to 65bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +92bps over bmk*
10-yr T-bond CZ9YT=RR +5 basis points to +98bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +369bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +341bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +286bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -10 basis points to +587bps over bmk*
5-yr T-bond HU5YT=RR -13 basis points to +543bps over bmk*
10-yr T-bond HU10YT=RR -12 basis points to +446bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1311 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, editing
by Stephen Nisbet)
