* Hungarian forint hits new low versus Swiss, yields jump
* Traders see leu testing 4.3/euro, eye cbank intervention
* Polish, Czech debt tenders smooth; yields fall
(Adds Czech, Polish auctions, updates prices)
By Michael Winfrey and Marius Zaharia
PRAGUE/BUCHAREST, 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 government
over budget performance and a clash with the central bank.
In contrast, yields dropped at debt tenders in better-placed
Poland and Czech Republic, with bids roughly three times higher
than the amount sold. Polish 5-year bond yields fell 5 bps to
5.19 percent after the auction. [] []
Investors have become increasingly interested in buying debt
instruments in relatively stable emerging economies like Poland
or Czech Republic, seeking higher premiums as core yields trade
at record lows. Prague has covered its financing needs for the
rest of 2010, which also puts downward pressure on yields.
"The offer pressure on bonds is receding as the ministry has
more or less covered all its needs," said Dalimil Vyskovsky, an
interest rates dealer at Komercni Banka.
"The outlook for next year's financing needs is rather
positive, and the credit spreads of Czech bonds are still
providing room for a drop in yields."
The jump in Hungarian yields coincided with a fresh record
low for the forint against the Swiss franc <CHFHUF=>, which went
past 266, before clawing back some ground to trade at 224.98 at
1243 GMT. It is down some 8 percent to 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.
Hungary's financial regulator said it saw no reason to take
specific action on the franc's gains [].
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.
Against the euro, the forint <EURHUF=> was down 0.4 percent
to 288.8. Poland's zloty <EURPLN=> fell 0.4 percent, while the
Czech crown <EURCZK=> and Romania's leu <EURRON=> dropped
0.1-0.2 percent.
PRESSURE ON HUNGARY
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.
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.
Minutes from the last central bank meeting showed governor
Andras Simor favoured a 25 basis point hike, but was voted down
by the majority [].
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.
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[].
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 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,
with BNP Paribas forecasting the leu could hit 4.32 per euro in
the coming days [].
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.72 24.678 -0.17% +6.46%
Polish zloty <EURPLN=> 3.949 3.935 -0.35% +3.93%
Hungarian forint <EURHUF=> 288.8 287.77 -0.36% -6.39%
Croatian kuna <EURHRK=> 7.28 7.279 -0.01% +0.4%
Romanian leu <EURRON=> 4.287 4.283 -0.09% -1.16%
Serbian dinar <EURRSD=> 105.13 105.31 +0.17% -8.8%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +10 basis points to 115bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +100bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +102bps 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 1443 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Michael Winfrey and Marius Zaharia; editing by
Ron Askew)
