* FX mostly lower, leu falls more after weak debt sale
* Stocks up, debt tenders still in focus
(Adds bonds, updates prices)
By Jason Hovet
PRAGUE, July 13 (Reuters) - Emerging European currencies
inched lower on Tuesday, with the Hungarian forint down before a
Treasury bill sale and Romania's leu leading losses after it
reportedly forecast a larger economic contraction in 2010.
The forint <EURHUF=> slipped 0.1 percent to 278.4 to the
euro, while the leu <EURRON=> dipped 0.3 percent after a report
the Romanian economy would contract more than 1.5 percent this
year due to a rise in value-added tax (VAT). []
The Czech crown <EURCZK=> hovered around a three-month high,
but gave up early gains after data showed a much
wider-than-expected May current account deficit due to
companies' dividend payments to foreign owners.
It traded flat on the day at 25.35 to the euro by 0845 GMT.
The Polish zloty <EURPLN=> fell 0.1 percent before CPI data
in the afternoon. Some analysts say Polish interest rates may
rise this year, while price data across the region still shows
central banks under no pressure to raise rates. []
Hungarian inflation was up more than expected in June.
Analysts said that high inflation cuts room for any rate
reductions but that the economy was still too weak to warrant a
rise in interest rates. []
"In the current market environment, rates on hold next week
seem to be a more probable monetary policy option in any case,"
Gyorgy Barta of Central European International Bank said.
The forint has lost 3.3 percent since May.
Stocks rebounded with more than a half a percent rise, led
by Budapest <> and Prague <>.
DEBT SALES DUE UP
The Czech 5-year bond <CZ1002737=> was steady before a
Wednesday auction, the first of the second half. Analysts expect
heavier borrowing in the last half of the year.
Hungary will offer 45 billion forints worth of 3-month
Treasury bills at a Tuesday sale, with results due at 0930 GMT.
Bond yields edged higher, as much as 8 basis points on the
shorter end. Markets were also eyeing a Thursday bond auction,
while the higher inflation data in the morning hurt appetite.
"This could again dampen rate cut expectations further,
fewer people will now expect a rate cut for sure," a dealer
said, adding liquidity remained low and inflated volatility.
The International Monetary Fund (IMF) continues its review
of Hungary's fiscal performance this week, the first since the
new centre-right government took power in May.
Investors are keen to see if the government gets the IMF's
blessing for its handling of the economy, while the country has
had little trouble selling its debt in the past month.
In Romania, another IMF loan recipient, the government
struggled again to drum up interest in its debt, selling only a
fraction of what it had planned on Monday. []
The average yield rose to 6.99 percent, and indicated yields
could break a self-imposed cap of 7 percent, analysts said.
Investors in Europe were also cautious ahead of Greece's
return to markets for the first time since April.
That could prove to be a litmus test for the euro, central
Europe's reference currency, in the short term ahead of the
results of the euro zone banks' stress tests next week.
"The stress test in Europe has investors on hot coals and
some of them are closing in the region," a Bucharest dealer
said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.35 25.35 0% +3.82%
Polish zloty <EURPLN=> 4.075 4.07 -0.12% +0.71%
Hungarian forint <EURHUF=> 278.42 278.27 -0.05% -2.9%
Croatian kuna <EURHRK=> 7.217 7.215 -0.03% +1.28%
Romanian leu <EURRON=> 4.256 4.245 -0.26% -0.44%
Serbian dinar <EURRSD=> 103.95 103.97 +0.02% -7.76%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -5 basis points to 120bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +135bps 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 -3 basis points to +396bps 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 +318bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +6 basis points to +604bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +573bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +481bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1047 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 Stephen Nisbet)
