* Hungarian forint hits new low versus Swiss, yields jump
* Traders see leu testing 4.3/euro, eye cbank intervention
* Risk aversion weighs after
* Market eyes Polish, Czech debt tenders
(Adds extended table)
By Michael Winfrey
PRAGUE, Sept 8 (Reuters) - Hungarian bond yields rose 15-20
basis points across the curve on Wednesday as global risk
aversion intensified and pressure grew on the new government
over budget performance and a clash with the central bank.
The jump in debt yields coincided with a fresh record low
for Hungary's forint against the Swiss franc <CHFHUF=>, which
skidded to near 226 per franc as the Swiss renewed gains against
the euro. The forint was down 0.9 percent per franc at 0800 GMT.
The forint has dropped more than 8.5 percent against the
franc since Aug. 20. With some 55 percent of Hungary's mortgages
in the Swiss currency, the forint's slide has caused a spike in
monthly payments for borrowers and eclipsed the worst-case 215
per franc level from central bank stress tests this year.
Dealers said there was resistance at around 227.25 forints
per franc, but it would depend more on euro/franc volumes --
themselves pressured by new worries over debt at some European
lenders -- than trading on the forint market.
"This little bounce back (from levels past 225) to stronger
levels seems to hold up for now, but apparently the global mood
has again taken a turn for the worse and the franc is making
headway versus the euro," a Budapest-based currency dealer said.
Against the euro, the forint was down 0.14 percent to 288.17
per euro at 0747 GMT. Poland's zloty fell 0.28 percent, and
Romania's leu less than 0.1 percent.
Dealers said Prime Minister Viktor Orban's refusal to
replace Hungary's 20 billion euro EU and International Monetary
Fund aid deal with a new one has heightened pressure on the
currency dealers say is the most exposed in the region.
Media reported on Wednesday that EU officials told Hungary
it needed to plug a hole of 0.3-0.5 percentage points of gross
domestic product in the 2010 budget deficit to avoid missing its
3.8 percent goal. That followed data showing Hungary's
end-August budget gap had ballooned to 124 percent of the goal.
They also said Hungary would have to bring its 2011 deficit
to below 3 percent of GDP, which Prime Minister Viktor Orban's
new government has suggested it could resist. []
Hungary's 10-year benchmark yield rose 15 basis points to
7.55 percent and on five-year paper it rose 19 points to 7.49
percent. Five year credit default swap prices rose 7 bps to a
three-month high of 380.
"One cause of the rise is that yesterday's comments by Orban
disappointed, many people had expected him to say something
reassuring over the budget or our relations with the IMF," a
fixed income trader said.
Goldman Sachs also said a new cap on central bank salaries
imposed by Orban could initiate a legal process that could hit
the forint, dent trust in his economic policies and complicate
talks on an EU relaxation of Budapest's 2011 fiscal target.
GROWTH LINE
Positive data helped boost the Czech crown, showing the
economy grew stronger than expected in the second quarter, by
0.9 percent versus the previous three months, and unemployment
eased slightly to 8.6 percent. [] []
But analysts said Hungarian numbers showing annual growth of
1 percent from April to June was largely due to a low base
effect, and the economy stagnated in quarterly terms.
In the other country seen as most risky, Romania, data
showed industrial output fell by 0.8 percent on the month in
July [].
Bucharest's government faces a series of potentially close
votes over an austerity plan tied to an EU/IMF bailout.
Political uncertainty hit debt issuance earlier this week
and dealers said it would likely spread to the currency market.
"We see potential for the leu to hit 4.32 per euro in the
coming days on the back of concerns over the government's
austerity measures and the global mood for risk," BNP Paribas
said in a morning note.
Other events expected on Wednesday included a 1.5-3.0
billion zloty bond auction in Poland at around 1000 GMT and the
Czechs' offer of 7 billion crowns in 3-year bonds, a day after
yields on its 5-year and 9-year papers hit all time lows.
Dealers said they expected strong demand following Prague's
placement of a 2 billion euro, 10-year Eurobond that the finance
ministry said closed out its borrowing needs until early 2011.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.7 24.678 -0.09% +6.55%
Polish zloty <EURPLN=> 3.948 3.935 -0.33% +3.95%
Hungarian forint <EURHUF=> 289 287.77 -0.43% -6.45%
Croatian kuna <EURHRK=> 7.282 7.279 -0.04% +0.37%
Romanian leu <EURRON=> 4.286 4.283 -0.07% -1.13%
Serbian dinar <EURRSD=> 105.32 105.31 -0.01% -8.96%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +19 basis points to 124bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +103bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +104bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -5 basis points to +406bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +403bps over bmk*
10-yr T-bond PL10YT=RR +4 basis points to +327bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +17 basis points to +661bps over bmk*
5-yr T-bond HU5YT=RR +19 basis points to +628bps over bmk*
10-yr T-bond HU10YT=RR +19 basis points to +532bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1142 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Michael Winfrey; editing by Patrick Graham)
