* FX down, forint hits fresh lows to Swiss franc
* Hungary bond yields jump 25-30 bps from Monday
* Poland met 77 pct of 2010 borrowing needs
By Krisztina Than and Dagmara Leszkowicz
BUDAPEST/WARSAW, Aug 31 (Reuters) - Hungary's forint led
currency losses in eastern Europe on Tuesday, hitting new lows
against a soaring Swiss franc that triggered concerns over
Hungary's exposure to franc-denominated debt.
Other currencies were also in negative territory as concerns
over the global economic recovery, particularly in the United
States, weighed on riskier assets.
"Investors fear that incoming U.S data will continue to be
weak, confirming that the global recovery is still far away,"
said Dorota Strauch, FX analyst at Raiffeisen bank. "Such
worries may continue to weigh on investor sentiment and affect
our region."
Stocks in the region also fell on Tuesday, losing some
0.8-1.5 percent, with only Budapest's BUX <> up some 0.4
percent.
At 1324 GMT, the forint <EURHUF=> was 0.8 percent weaker
against the euro and had been bid as low as 222.74 against the
Swiss franc, according to Reuters data, causing unease in
hundreds of thousands of Hungarian households whose Swiss franc
mortgage payments will rise.
David Nemeth, an analyst at ING, said sustained weakness in
the forint against the franc could hurt the economy, which is
just climbing out of recession.
"If this lasts for one or two weeks there won't be a big
problem, the question is how lasting this franc/forint trend
will be," Nemeth said.
"If it were to prevail for 3-6 months that could lead to a
significant slowdown in the economy as it curbs domestic demand
and also banks' capital needs may increase in addition to the
bank tax they will have to pay."
Hungary's economy is one of the region's laggards and is
seen growing by only 0.9 percent this year according to the
central bank's forecast, much slower than Poland, which posted
3.5 percent of growth in the second quarter of 2010.
The Polish zloty <EURPLN=> and Romania's leu <EURRON=> were
each 0.5 percent weaker, while the Czech crown <EURCZK=> fell
0.2 percent.
RECORD BORROWING
Hungarian government paper yields jumped some 25-30 basis
points, tracking the forint, while Czech bond yields were up to
6 basis points higher ahead of the Wednesday release of the debt
supply plans for the fourth quarter.
The Czech issuance calendar for the last three months of
2010 will likely have more shorter-dated papers to cut debt
servicing costs, dealers said, adding that overall issuance on
domestic markets will be lower than previously expected as the
ministry aims for a eurobond issue still this year.
In Poland the finance ministry said it will issue up to 11
billion zlotys in bonds and up to 2 billion zlotys in treasury
bills in September, and dealers said paper prices may go up as
the supply, particularly of the shorter-dated papers, is
relatively small.[]
Poland and the Czech Republic face record borrowing needs,
but are seen better placed for economic recovery, thus had no
problems with placing their debt at decent prices so far.
Poland has already met 77 percent of its borrowing needs for
2010, a touch more than the Czechs 74 percent seen by analysts.
In Romania -- which is in a worse position than Poland and
Czech Republic -- the finance ministry said an international aid
programme and eurobond issuance plans will keep the financing
position comfortable. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.826 24.779 -0.19% +6.01%
Polish zloty <EURPLN=> 4.003 3.985 -0.45% +2.52%
Hungarian forint <EURHUF=> 286.8 284.65 -0.75% -5.74%
Croatian kuna <EURHRK=> 7.275 7.268 -0.1% +0.47%
Romanian leu <EURRON=> 4.256 4.237 -0.45% -0.44%
Serbian dinar <EURRSD=> 105.02 104.97 -0.05% -8.7%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to 122bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +123bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +120bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +402bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +394bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +331bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +30 basis points to +664bps over bmk*
5-yr T-bond HU5YT=RR +26 basis points to +625bps over bmk*
10-yr T-bond HU10YT=RR +33 basis points to +550bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1524 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(on an analysis on the impact of the stronger franc on
Hungary's economy please click on [])
(Reporting by Reuters bureaus, Writing by Krisztina
Than/Dagmara Leszkowicz; Editing by John Stonestreet/Ruth
Pitchford)
