* FX, stocks rise as euro rallies on Spain auction, Trichet
* Forint at 1-wk high, regains ground lost on debt fears
* Hungarian bonds rebound, though bill auction cut by 30 pct
* Czech 52-week T-bill yield rises 13 bps
* Leu lags as market awaits confidence vote
(Recasts with new prices, comments)
By Marius Zaharia and Sandor Peto
BUCHAREST/BUDAPEST, June 10 (Reuters) - Central European
assets firmed on Thursday, tracking a stronger euro as risk
appetites revived and shrugging off the impact of a weak
Hungarian bond auction.
Solid demand at a Spanish bond auction underpinned by the
440 billion euro safety net for fragile euro zone economies
eased concerns over debt, as did a European Central Bank pledge
to keep liquidity flush via lending operations for the rest of
this year.
Central European markets recovered from steep falls late
last week when concerns over debt spread from the euro zone
periphery to Hungary, which has the highest debt to economic
output ratio in the region at about 80 percent.
An economic plan announced by Hungary's government this week
helped settle the country's markets. The Hungarian forint
<EURHUF=> surged against the euro in late trade on Thursday to
its firmest levels since its plunge a week ago.
It was bid at 278.85 at 1438 GMT, firmer by 0.8 percent from
Wednesday. The region's most liquid currency, the zloty <EURPLN=>
strengthened 0.6 percent to 4.101, while the Czech crown gained
0.7 percent to 25.747.
The region's main stock exchange indices were higher by
1.1-2.3 percent at 1429 GMT.
"The concrete cause of the firming is that the euro/dollar
is heading into a favourable direction," one Budapest-based
currency dealer said.
"I would say the forint could firm slowly further, but I
would not bet on it. Swings of about 4 forints (against the
euro) remain possible, at any time."
AUCTIONS SIGNAL CONTINUING CONCERNS
Asset prices in the region's mostly export-reliant emerging
economies have been strongly dependent on global risk appetite
and recovery prospects. The euro zone debt crisis has curbed
gains posted in the region's markets earlier this year.
Better news from Hungary and international markets boosted
sentiment this week, but traders said Thursday's government debt
auctions in Hungary and the Czech Republic indicated that
confidence in the regions' assets has not been fully restored.
Demand for Hungarian [] and Czech
[] one-year Treasury bills dropped and yields rose
from the previous auctions held two weeks ago.
Czech yields jumped 13 basis points as Treasury bill supply
remains strong, but the average yield remained relatively low by
European standards at 1.23 percent.
Hungary cut its auction offer by 15 billion forints to 35
billion forints. The average yield still rose to 5.35 percent
from 5.17 percent and traders said the debt agency AKK could be
forced to accept higher yields at future auctions as the market
has priced out earlier expected central bank rate cuts.
"The (market) reception of the (government's economic)
action plan was positive, but no one dares to take big bets yet
as there is uncertainty about the feasibility (of the plan),"
one trader said.
Bond yields dropped by around 10 basis points, mainly at the
long end, as the forint's rebound improved sentiment.
Next Thursday the government will auction 50 billion forints
worth of bond <HUISSUE>, an unchanged amount from its previous
bi-weekly auctions, and traders said demand there would be a key
test of investor confidence following the recent turmoil.
Romania has rejected bids at four debt tenders over the past
six weeks as investors demanded higher yields.
Inflation data there was roughly in line with forecasts and
largely ignored by investors who focus on a confidence vote for
the government's austerity package next Tuesday. The leu
<EURRON=> underperformed, trading flat at 4.216 against the
euro.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.747 25.934 +0.73% +2.22%
Polish zloty <EURPLN=> 4.101 4.127 +0.63% +0.07%
Hungarian forint <EURHUF=> 278.85 281 +0.77% -3.05%
Croatian kuna <EURHRK=> 7.23 7.238 +0.11% +1.1%
Romanian leu <EURRON=> 4.216 4.215 -0.02% +0.51%
Serbian dinar <EURRSD=> 103.3 103.803 +0.49% -7.18%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -5 basis points to 147bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +172bps over bmk*
10-yr T-bond CZ9YT=RR -9 basis points to +150bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +415bps over bmk*
5-yr T-bond PL5YT=RR -7 basis points to +380bps over bmk*
10-yr T-bond PL10YT=RR -7 basis points to +319bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -8 basis points to +621bps over bmk*
5-yr T-bond HU5YT=RR -16 basis points to +574bps over bmk*
10-yr T-bond HU10YT=RR -19 basis points to +485bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1638 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Marius Zaharia;
Editing by Jason Webb, John Stonestreet)
