* Region benefits from improved global sentiment
* Forint up but remains vulnerable
* Polish, Czech bonds sell well, yields down
(Adds results of debt tenders, fresher prices)
By Marius Zaharia and Dagmara Leszkowicz
BUCHAREST/WARSAW, July 21 (Reuters) - Hungary's forint
firmed on Wednesday, dragging other central European currencies
to stronger levels, while successful Polish and Czech bond
tenders boosted investors' appetite for their debt.
The forint lost more than 3 percent after the weekend
suspension of talks to review its 20 billion euro aid deal.
It recovered almost one percent on Tuesday on the back of
gains for global stocks but dealers said investors still looked
to be positioned for more weakness pending Friday's announcement
of EU bank stress test results.
"The recent comments of Hungary's PM about keeping the
deficit in check as well as the fact that talks with IMF are
suspended, not broken, calmed markets in the region," said Karol
Zaluski, dealer at ING bank in Warsaw.
"However, stress tests are key for the region now, and they
will determine any moves further on."
By 1256 GMT, the forint <EURHUF=> firmed more than 1 percent
trading at 283.7 per euro. The Polish zloty <EURPLN=> added 0.5
percent, while the Czech crown <EURCZK=> and Romania's leu
<EURRON=> were up 0.1 percent and 0.3 percent, respectively.
Hungary has pledged to stick to its fiscal targets and
analysts say it is still likely it will come to terms with the
IMF, possibly after local elections in early October.
The country's news website reported Hungary's economy
ministry expects the pressure on the forint currency to
disappear after Thursday's likely parliamentary approval of the
government's tax reform package, news website index.hu reported
on Wednesday. []
In Poland, Finance Minister Jacek Rostowski said the recent
zloty weakening was caused by the situation in Hungary as well
as euro weakness against the dollar. []
TENDERS SUCCESSFUL
The Czech Republic sold more bonds than planned at a primary
auction of 9-year debt on Wednesday and yields fell sharply
compared to the last sale in May, showing strong investor
demand. []
After the auction, the yield on the secondary market was
3.79 percent, 3 basis points below the auction price.
At the same time Poland sold 1.67 billion zlotys of bonds
maturing in 2020 in exchange for bonds due at 2010 at a switch
tender.
The average accepted yield of 10-year paper stood at 5.887
percent, up from 5.791 accepted at the last regular tender on
June 16, but dealers said market sentiment improved after the
tender.
"The market is stronger after the switch as the ministry
managed to sell more than 1.6 billion zlotys in papers with a
longer maturity," said Marek Kaczor, chief fixed income dealer
at PKO BP.
"One should remember that last week the ministry barely sold
5-year bonds, so it is clear that the sentiment improved."
The Czechs face record-high gross borrowing of around 280
billion crowns this year with most of it still to come, while
Poland saw its borrowing needs at around 197 billion zlotys but
the ministry has already said the amount would be smaller.
It had already met more than 60 percent of it for this year.
In Romania, which has recently hiked the value added tax and
cut public sector wages by a quarter, economic forecasts
continued to worsen. Economy Minister Adriean Videanu said the
IMF expected the economy to contract by 0.5 percent next year,
revised from a previous forecast for growth. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.331 25.351 +0.08% +3.9%
Polish zloty <EURPLN=> 4.095 4.115 +0.49% +0.22%
Hungarian forint <EURHUF=> 283.7 286.75 +1.08% -4.71%
Croatian kuna <EURHRK=> 7.236 7.236 0% +1.01%
Romanian leu <EURRON=> 4.259 4.271 +0.28% -0.51%
Serbian dinar <EURRSD=> 104.91 104.867 -0.04% -8.61%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +18 basis points to 109bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +116bps over bmk*
10-yr T-bond CZ9YT=RR -13 basis points to +127bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +398bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +377bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +321bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -6 basis points to +622bps over bmk*
5-yr T-bond HU5YT=RR -9 basis points to +579bps over bmk*
10-yr T-bond HU10YT=RR -13 basis points to +479bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1456 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia;
editing by Patrick Graham/Ruth Pitchford)
