* Hungarian bond yields up across curve
* Forint falls as risk cut back
* Zloty weaker on current account
* Czech crown shrugs off government crisis
By Michael Winfrey
PRAGUE, April 12 (Reuters) - Hungarian bond yields rose on
Tuesday after higher inflation data suggested the central bank
would keep interest rates on hold instead of cutting them to
boost growth, while the forint edged lower.
Poland's zloty edged back towards breakeven following an
early session loss after a member of the central bank's Monetary
Policy Council said interest rates should rise by half a
percentage point in May. []
The forint <EURHUF=> fell 0.4 percent against the euro in
early trade to 266.27 per euro after data showed inflation came
in at 4.5 percent in March, fuelled by rising food prices, with
a 2.5 percent jump in core inflation that indicated rising
global commodity prices have filtered into the wider economy.
The data pushed up bond yields by 6-7 basis points across
the curve and analysts said it had weakened expectations of
policy easing closer to the end of the year.
Yields fell slightly in an auction of 50 billion forints
($272.9 million) of three-month treasury bills, to 5.92 percent.
But dealers said rising global risk aversion and gains in
the dollar against the euro -- which the region's currencies
often track -- had hit the Hungarian currency, while a weaker
than expected growth outlook there was prompting investors to
close zloty-forint short positions.
"The market had been overly optimistic and this correction
had been looming," a Budapest-based currency dealer said.
"Since yesterday the sentiment has turned worse, and there
have been some negative analyst comments and trade ideas,
therefore the forint eased."
Dealers said the forint had also suffered from news that the
right-wing Fidesz government was planning to overhaul the
country's central bank law and also raise budget revenues by
raising an extraordinary tax on pharmaceutical firms in its
effort to cut its debt and fiscal deficit levels.
[]
"The Fidesz government is always good for fiscal policy
surprises, but debt reduction at any cost is not popular on the
FX markets," Commerzbank said in a report.
Romania's leu also slipped, dipping 0.2 percent. The Czech
crown <EURCZK=> was the only gainer from the EU's four biggest
emerging economies, shrugging off a political crisis to rise a
touch to 24.404 per euro.
Serbia's dinar, up almost 4.8 percent on the year, gained
slightly after Prime Minister Mirko Cvetokovic said his
government aimed to finalise a new International Monetary Fund
financing deal in September. []
MARKETS SHRUG OFF CZECH TURMOIL
Poland's zloty fell 0.2 percent against the euro in early
trade after a central bank official said the 'errors and
omissions' category in the current account data would be revised
to reflect at least a 1 percent of GDP increase in the deficit,
which stood at 2.4 percent of GDP in 2010. []
But it later erased that loss to rise by 0.1 percent on the
day after MPC member Andrzej Bratkowski said rates should rise
to 4.5 percent, from 4 percent now, and stay there for at least
three quarters.
A leading daily reported Poland's 2010 fiscal deficit could
amount to 7.4 percent of gross domestic product, less than the
7.9 percent previously estimated by the government.
[]
Warsaw has pledged to cut its fiscal deficit to 3 percent of
GDP by 2012, but analysts are sceptical that it can do so. On
Monday, ratings agency Standard & Poor's said the government
should embark on fiscal consolidation.
The Czech crown shrugged off a looming cabinet reshuffle
resulting from an alleged bribery scandal in which deputies from
the junior ruling Public Affairs party are reported to have
received payments from de-facto party head Vit Barta to remain
loyal. []
Barta resigned from his transport minister post last week
and has denied wrongdoing, but Prime Minister Petr Necas has
moved to sack two other ministers from the party in a shakeup
that has threatened to break apart his three-party coalition.
Analysts have warned the crisis could further slow fiscal
reforms that have already slowed due to coalition infighting
over issues including the levels of tax hikes and other issues.
"The question now is whether the coalition can sort out its
problems before the markets begin pricing in a more bearish
scenario and adding risk premia onto the currency," said Nomura
analyst Peter Attard Montalto.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.404 24.415 +0.05% +2.44%
Polish zloty <EURPLN=> 3.975 3.968 -0.18% -0.43%
Hungarian forint <EURHUF=> 266.34 265.07 -0.48% +4.37%
Croatian kuna <EURHRK=> 7.364 7.366 +0.03% +0.22%
Romanian leu <EURRON=> 4.114 4.105 -0.22% +2.89%
Serbian dinar <EURRSD=> 101.11 100.96 -0.15% +4.76%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to -13bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +46bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +59bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +431bps over bmk*
5-yr T-bond HU5YT=RR +17 basis points to +405bps over bmk*
10-yr T-bond HU10YT=RR +9 basis points to +361bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1026 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Michael Winfrey; Editing by Catherine Evans)
