* Crown, zloty, forint gain vs morning levels
* Hungary sells HUF 50 bln T-bills, yields rise
* Hungary parlt to vote on tax reform bill on Thurs
* Romania debt sale watched at 400 mln leu tender
By Marton Dunai and Gergely Szakacs
BUDAPEST, July 22 (Reuters) - Hungary's forint led gains
among emerging European currencies on Thursday, boosted by a
fresh government commitment to cut the budget deficit, while the
country sold all the bills planned at a tender.
Hungarian markets were rocked at the start of the week after
a review of Hungary's 20 billion IMF/EU loan was suspended at
the weekend, raising investor concerns about the government's
ability to secure fresh international funding.
Hungary sold all 50 billion forints of 12-month Treasury
bills on offer at an auction on Thursday <HUAUCTION01>. Dealers
cautioned however that higher yields combined with meagre demand
should temper optimism about the result. []
"The debt agency let (accepted) yields rise further than
previous expectations, but this (tender) alone does not have
much significance," a fixed income trader said.
"The important thing will be the amount of bonds offered for
next week <HUISSUE> (to be posted) in the afternoon," the dealer
said, adding that there was very low demand for short papers
with the long end attracting more buying interest.
A currency dealer said the forint, which sank to lows around
292 to the euro on Monday in the weake of the IMF news, got
support from a fresh commitment by Budapest to reduce its budget
deficit.
Hungary will reduce its budget deficit below 3 percent of
GDP in the coming years from 3.8 percent targeted for this year,
the Economy Minister was cited by national news agency MTI as
saying. []
"This Matolcsy comment may have played into the firming
because the (bill) auction did not really shine," the dealer
said.
"Yields were high, demand was not very strong and I think
the debt agency just did not want to run the risk of cutting
back the offer so it decided to stomach higher yields instead."
The dealer said the forint was also boosted by favourable
global sentiment, even though it remained volatile and was more
prone towards weakening as significant further gains were
limited.
Later on Thursday, Hungary's parliament will vote on the
centre-right government's tax reform package, including a new
financial sector levy designed to bring the budget deficit to
3.8 percent of GDP by the end of the year. []
The zloty <EURPLN=> and the crown <EURCZK=> had both risen
by around 0.3 percent by 1004 GMT
Dealers said the crown got support from the government's
reform plans and the break of a technical euro support level.
"The crown has become a target for investors as a reserve
currency and there was quite a bit of closing of long positions
on Polish/crown and forint/crown," said a Prague trader.
"We got under a technical support level, which is between
25.23 and 25.25 and the market is trying to test the strength of
this support. So far we are below, but there are more (euro)
buying orders than selling."
ROMANIA TENDER WATCHED
Romania's finance ministry tenders 400 million lei in
10-year treasury bonds on Thursday and most analysts expect the
ministry to continue to reject all bids above a self-imposed top
yield of 7 percent.
But with IMF-required fiscal austerity measures hampering
economic recovery and an unstable government, investors will
continue to demand a higher premium on Romanian debt, and the
ministry will either sell very little or reject all bids.
Meanwhile, it has tapped the money market, borrowing
short-term, and plans to issue a domestic euro tender on July
28, both alternative methods to finance its budget deficit that
analysts say will end up costing the state more.
An IMF mission is expected in Bucharest next week to review
Romania's progress in meeting conditions of its 20 billion euros
aid package.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.17 25.269 +0.39% +4.56%
Polish zloty <EURPLN=> 4.094 4.108 +0.34% +0.24%
Hungarian forint <EURHUF=> 283.75 285.4 +0.58% -4.72%
Croatian kuna <EURHRK=> 7.237 7.236 -0.01% +1%
Romanian leu <EURRON=> 4.266 4.263 -0.07% -0.67%
Serbian dinar <EURRSD=> 105.06 105 -0.06% -8.74%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +10 basis points to 123bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +120bps over bmk*
10-yr T-bond CZ10YT=RR -9 basis points to +131bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +402bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +381bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +322bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -8 basis points to +618bps over bmk*
5-yr T-bond HU5YT=RR -12 basis points to +571bps over bmk*
10-yr T-bond HU10YT=RR -10 basis points to +475bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 0102 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux, writing by Marton Dunai and
Gergely Szakacs; editing by Toby Chopra)
