* FX mixed, leu falls more after weak debt sale, GDP f'cast
* Stocks up, debt tenders still in focus
* Hungary sells bills, Romania holds depo auction
(Updates with debt auctions)
By Jason Hovet
PRAGUE, July 13 (Reuters) - Emerging European currencies
were mixed on Tuesday, with the Romanian leu leading losses
after Romania reportedly forecast a larger economic contraction
in 2010, while the Hungarian forint recovered early losses.
The forint <EURHUF=> inched up 0.1 percent to 277.91 to the
euro, while the leu <EURRON=> dipped 0.3 percent after the
finance minister was quoted as saying the Romanian economy would
contract more than 1.5 percent this year due to a rise in
value-added tax. []
Romania's finance ministry held a deposit auction on the
money market on Tuesday, attracting 1.1 billion lei ($324.4
million) in two-week deposits -- a day after it sold only a
fraction of its intended amount at a one-year Treasury bill
auction.
The ministry has rejected all bids, or significantly
undersold debt, across maturities at tenders since early May
when investors started to demand higher yields after the
government unveiled harsh spending cuts in exchange for foreign
aid.
Analysts have warned it would remain difficult for Romania
to continue cutting off yields in debt sales at a self-imposed 7
percent, and doing so could hurt funding. []
Nicolaie Alexandru-Chidesciuc, ING Bank's Romania chief
economist, said deposit auctions were not a sustainable
alternative. "Doing this repeatedly would put pressure on
long-term yields," he said.
Hungary, an International Monetary Fund aid recipient
alongside Romania, sold 45 billion forints worth of three-month
bills on offer on Tuesday, with demand more than double that.
But government bond yields edged higher, and by as much as 8
basis points on the shorter end, before a bond auction on
Thursday, while data showing the June inflation rate was higher
than expected 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 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.
AUCTION BOOST
The Polish zloty <EURPLN=> fell 0.2 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. []
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 bid up 0.1 percent at 25.33 to the euro by 1055 GMT.
The Czech five-year bond <CZ1002737=> was steady before a
Wednesday auction, the first of the second half. Analysts expect
heavier borrowing in the second half of the year.
Stocks rebounded with more than a percent rise, led by
Budapest <> and Prague <>.
Markets were boosted by a smooth Greek Treasury bill auction
on Tuesday, Athens' first debt sale since an EU/IMF emergency
loan fund was agreed for Greece in May. []
Dealers have said the sale could be a litmus test for the
euro, central Europe's reference currency, ahead of the results
of European banks' stress tests next week.
"The stress test in Europe has investors on hot coals and
some of them are closing (positions) 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=> 25.33 25.35 +0.08% +3.9%
Polish zloty <EURPLN=> 4.076 4.07 -0.15% +0.69%
Hungarian forint <EURHUF=> 277.91 278.27 +0.13% -2.72%
Croatian kuna <EURHRK=> 7.192 7.215 +0.32% +1.63%
Romanian leu <EURRON=> 4.257 4.245 -0.28% -0.46%
Serbian dinar <EURRSD=> 104.07 103.97 -0.1% -7.87%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -6 basis points to 119bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +133bps over bmk*
10-yr T-bond CZ9YT=RR -5 basis points to +139bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +396bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +375bps over bmk*
10-yr T-bond PL10YT=RR -4 basis points to +316bps 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 +571bps over bmk*
10-yr T-bond HU10YT=RR 0 basis points to +479bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1256 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 and Susan Fenton)
