* Hungary raises first bond sale since IMF talks broke down
* Forint regains ground after auction
* Zloty on strong side of 4 vs. euro, crown off highs
(Updates markets, adds Romania debt plan)
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 the first bond auction since the collapse of talks with
the IMF prompted a series of warnings on its credit rating.
While there are still plenty of concerns about Hungary's
fiscal policy and debt financing, rising risk appetite is
buoying Hungarian assets, which have significantly
underperformed the region since the talks broke down on July 17,
analysts said.
The Czech crown <EURCZK=> and the Polish zloty <EURPLN=>
hovered near key levels reached earlier this week after rallying
in recent weeks. Stocks in the region rose after retreating on
Wednesday, tracking other emerging markets. []
Hungary sold 68.1 billion forints worth of bonds at its
auctions, 18.1 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 10-18 basis
points in the secondary market from Wednesday and the bonds
traded near the average auction yields set at the primary sale.
The forint <EURHF=> gained 0.2 percent against the euro
after the auction but was unchanged from Wednesday's close.
The Hungarian unit has recovered more than 3 percent 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 reach an agreement 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, plans to borrow on the
domestic market more than three times as much in August as it
did in July, the finance ministry said. []
Bucharest sold 1.2 billion euros ($1.56 billion) in one-year
Treasury bills on Wednesday, three times the planned amount,
with yields rising 65 basis points. []
ZLOTY, CROWN AROUND KEY LEVELS
The Polish zloty was bid 0.3 percent firmer, on the strong
side of the 4.0 technical and psychological level, rebounding
from an early retreat below 4.0. Bullish growth hopes had pushed
the unit past the 4.0 level earlier this week.
The Czech crown stayed on the firmer side of the key 25.0
level which it broke through on Wednesday, though it was
slightly off 20-month highs and down 0.3 percent from
Wednesday's close.
The Romanian leu <EURRON=> gained 0.1 percent.
Strategists have become more bullish on the crown after
improving economic data from the Czech Republic and its key
trading partner Germany. A new centre-right Czech government has
also strengthened the country's appeal to investors as it has
committed 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 at in the past to protect export
strength. Analysts said there was still a risk they could speak
out before an Aug. 5 policy meeting, when the central bank is
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=> 24.76 24.694 -0.27% +6.29%
Polish zloty <EURPLN=> 3.989 4.001 +0.3% +2.88%
Hungarian forint <EURHUF=> 282.5 282.51 0% -4.3%
Croatian kuna <EURHRK=> 7.243 7.243 0% +0.91%
Romanian leu <EURRON=> 4.249 4.252 +0.07% -0.27%
Serbian dinar <EURRSD=> 105.907 106.17 +0.25% -9.47%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +8 basis points to +64bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +91bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +90bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +381bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +361bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +309bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -11 basis points to +586bps over bmk*
5-yr T-bond HU5YT=RR -19 basis points to +537bps over bmk*
10-yr T-bond HU10YT=RR -14 basis points to +442bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1536 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Sandor Peto/Marton
Dunai; Editing by Susan Fenton)
