* Forint falls to 15-mth low vs Swiss franc, worry to banks
* Investors watching Romania court ruling on austerity
* Fx, stocks, bonds drop on increased risk aversion
* Hungary cuts 12M bill auction, demand light at Czech sale
(Updates with new prices/comments)
By Jason Hovet and Sandor Peto
PRAGUE/BUDAPEST, June 24 (Reuters) - Hungary's forint led
losses among Central European currencies on Thursday, hitting a
15-month low against the Swiss franc and triggering concerns
over the sizeable amount of Swiss franc loans held by Hungarian
households.
Assets fell across the region as the euro and euro zone
periphery government debt remained under pressure, increasing
risk aversion, with the biggest currency losses in the region's
most liquid units.
The forint <EURHUF=> and the zloty <EURPLN=> fell 1 and 0.6
percent against the euro, respectively, by 1331 GMT. The Czech
crown <EURCZK=> eased 0.2 percent to 25.735.
Romania's leu also weakened against the euro, with investors
keeping a wary eye on a possible court ruling later in the day
over austerity measures considered key to continued aid.
The forint's slide against the Swiss franc came after the
Swiss National Bank last week backed off its earlier policy to
stem the franc's firming.
"The Swiss franc is kind of a safe haven. Investors get rid
of emerging assets and the franc's firming signals risk
aversion," one Budapest-based dealer said. "The forint can
easily weaken to between 210-215."
BONDS EASE, HUNGARY CUTS AUCTION
Central European markets have been rattled recently by
growing worries over the region's ability to rein in budget
deficits, especially in IMF-aid recipients Romania and Hungary.
Debt yields have risen across the region since May, making
it difficult for Romania to sell its bonds and treasury bills.
On Thursday, Hungarian bond yields rose, tracking the
forint's weakening, mainly in shorter maturities as the yield
curve becomes less steep, with the market pricing out central
bank interest rate cuts expected earlier. The 3-year yield rose
20 basis points to 7.1 percent.
Polish bond yields rose by up to 5 basis points. Yield
spreads over corresponding Bunds widened across the region,
while Central Europe's main stock exchange indices dropped
0.1-1.1 percent, tracking a worsened sentiment in developed
equity markets.
Hungary sold 10 billion forints ($50.86 million) less than
planned at a 12-month bill sale, and demand was light at a Czech
sale. [] []
Hungary's government hopes to cut the 2011 budget deficit to
levels agreed with lenders, Deputy Prime Minister Tibor
Navracsics said late on Wednesday [], but markets
shrugged off domestic news.
"I expect the forint to stabilize between 280 and 285
against the euro. Bond yields can rise further by about 10 basis
points, but they can stabilize there," one fixed income trader
said.
Romania's government survived a parliamentary no-confidence
vote on June 15 over planned tough public sector pay cuts. The
constitutional court may decide later on Thursday whether the
austerity measures are legal, and investors have mostly priced
in a ruling in which the cuts are upheld. []
But the court has a history of overturning reform packages.
A court rejection of the cost-saving measures would further
postpone International Monetary Fund aid, increasing financing
risks. []
Romanian 5-year credit default swaps widened around 9 basis
points to a nearly two-week high of 380 bps on Thursday.
The leu <EURRON=> inched down 0.1 percent to 4.233 to the
euro, sticking around its lowest levels this year.
"If the cuts pass then the leu's firming should be rather
modest, as the market has priced in that the measures will pass.
Should they be rejected, we will likely see sudden
depreciation," a Bucharest trader said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.735 25.695 -0.16% +2.27%
Polish zloty <EURPLN=> 4.104 4.08 -0.58% 0%
Hungarian forint <EURHUF=> 283.38 280.67 -0.96% -4.6%
Croatian kuna <EURHRK=> 7.194 7.191 -0.04% +1.6%
Romanian leu <EURRON=> 4.233 4.228 -0.12% +0.1%
Serbian dinar <EURRSD=> 103.73 104.04 +0.3% -7.57%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +9 basis points to 144bps over bmk*
7-yr T-bond CZ7YT=RR +6 basis points to +164bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +144bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +10 basis points to +434bps over bmk*
5-yr T-bond PL5YT=RR +7 basis points to +398bps over bmk*
10-yr T-bond PL10YT=RR +4 basis points to +334bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +25 basis points to +643bps over bmk*
5-yr T-bond HU5YT=RR +21 basis points to +605bps over bmk*
10-yr T-bond HU10YT=RR +10 basis points to +507bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1531 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 Sonya Hepinstall)
