* Forint, bonds rebound as markets digest deficit plan
* Detail still lacking, short-term gains only expected
* Other FX up; exports give boost to region's GDP
* Bulgaria debt insurance costs up on EU comments
(Adds Bulgaria CDS, Belka's zloty comments, quotes)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, June 9 (Reuters) - The forint rose on
Wednesday with investors mostly cheered by Hungary's plan to
curb swelling finances, but central Europe's budget woes
remained in focus, with Bulgaria's risk premiums spiking.
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.
By 1332 GMT the forint <EURHUF=> rose 0.5 percent to 282.28
against the euro, off previous gains. The zloty <EURPLN=> was up
the same, while the Czech crown <EURCZK=> was up 0.3 percent.
"The domestic waves have calmed down," a Budapest dealer
said.
The gains were also helped by GDP data across the region.
Exports held strong in the first quarter, while Hungary and
Czech Republic also saw a moderate pick-up in domestic demand
that had been lacking before. []
Hungarian stocks <> were down 0.6 percent, in contrast
with gains elsewhere in the region, with the country's leading
bank OTP <OTPB.BU> falling some 2.3 percent.
FISCAL RISKS
Analysts and dealers said Hungarian markets were still
vulnerable to risk appetite. The government's plan for a bank
tax could also hinder lending and growth.
"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."
Hungary's five-year credit default swaps (CDS) stood at
around 355.9, down from 13-months highs over 400 bps last week.
But Bulgaria's rose to 11-month highs after the European
Commission expressed concern about the quality of statistics it
reports. Earlier this year, Bulgaria admitted it has hidden the
truth about the deficit and was forced to drop plans to apply
for the ERM-2 euro zone antechamber this year.[]
Hungarian bonds were mixed. The 10-year bond yield dipped 8
basis points to 7.57 percent; dealers and analysts said the
yield will likely bottom around 7.5 percent.
"Concerns can return any time. It's very easy to squander
confidence ... what has happened is not good for us at all," one
Budapest-based dealer said.
The Romanian leu <EURRON=> was flat with investors on the
sidelines before a government no-confidence vote for proposed
pay cuts next week, crucial to its IMF-led aid package.
Romania rejected bids at four debt tenders over the past six
weeks as investors demanded higher yields due to political risk.
The Czech Republic sold almost double the offer in a 3-year
bond auction on Wednesday, but paid a higher yield because of
growing issuance. []
In Poland, a parliamentary committee approved the candidacy
of Marek Belka at the helm of the central bank [].
He labelled the zloty as "relatively weak" at current levels
and backed currency interventions to avoid high volatility. He
also told the committee he though economic growth was more
important than inflation at this stage [].
The zloty was little moved following the comments.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.916 25.994 +0.3% +1.55%
Polish zloty <EURPLN=> 4.115 4.137 +0.53% -0.27%
Hungarian forint <EURHUF=> 282.28 283.56 +0.45% -4.23%
Croatian kuna <EURHRK=> 7.236 7.242 +0.08% +1.01%
Romanian leu <EURRON=> 4.215 4.22 +0.12% +0.53%
Serbian dinar <EURRSD=> 103.9 103.73 -0.16% -7.72%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to 163bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +175bps over bmk*
10-yr T-bond CZ9YT=RR -4 basis points to +169bps 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 +5 basis points to +630bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +589bps over bmk*
10-yr T-bond HU10YT=RR -11 basis points to +501bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1632 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
and Marius Zaharia; Editing by ...)
