* 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
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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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