* Forint gains, Polish zloty lower in quiet trade
* Hungary sells more bonds than planned, yields fall
(Updates with more details on Hungary, quotes)
By Krisztina Than and Marius Zaharia
BUDAPEST/BUCHAREST, Jan 27 (Reuters) - Hungarian bond yields
fell at a debt auction and the forint outperformed its central
European peers on Thursday on optimism about fiscal reforms
promised by the government for next month.
Hungary sold more bonds than planned across three maturities
with average yields falling 52-55 basis points from previous
sales. The sale boosted sentiment on the forint, which climbed
0.5 percent after the tender.
The forint strengthened further after Economy Ministry
Gyorgy Matolcsy said the government was preparing "very serious"
reforms, aimed at fundamentally improving the sustainability of
the state budget by 2013-2014. [] The government is
due to unveil its fiscal reform package next month.
At 1527 GMT, the forint was 1.2 percent up on the day.
The auction's success came after a secondary market rally,
which drove yields to near nine-week lows as investors bet the
fiscal reform package will help the deficit stay low beyond 2012
when one-off taxes on businesses expire.
For the auction results, click on []
[]
"The positive sentiment prevails," one trader said. "I see
no serious technical levels which would contain the decline in
yields, perhaps 7 percent can be a support for 10-year yields."
Yields dropped further after the auction, with demand
focusing on the five and 10-year segments. The five-year yield
dropped 15 basis points to 7 percent, while the 10-year yield
fell 6 basis points to 7.22 percent.
HUNGARY VS POLAND
The zloty/forint pair <PLNHUF=R> traded near the bottom of
this year's range at 69.7 following the recent improvement in
sentiment on Hungary, but RBC Capital Markets recommended buying
the Polish zloty against the forint in the short term.
[]
RBC expects Hungary's central bank to adopt a more dovish
stance in future but sees Polish rate-setters favouring a
stronger currency. It also cited fiscal uncertainty in Hungary
as a risk to the forint.
"In the past government announcements have tended to
disappoint and serve as a reason to sell HUF-based assets. There
is a risk of a repeat in February," RBC said.
The zloty <EURPLN=> was down 0.4 percent, while the Czech
crown <EURCZK=> and Romanian leu <EURRON=> were flat.
A dealer in Bucharest said market players in the region were
buying the forint against the zloty on Thursday, unwinding some
of the positions built in recent months on bets for another year
of Polish outperformance.
Investors have been reassessing Poland's rate outlook in the
past few days following this month's 25 basis point hike to 3.75
percent and the zloty has retreated slightly after a strong
rally at the start of the year.
The crown is the region's safe haven and top performer this
year, but has see-sawed in recent sessions, with corporates
using crown rallies to buy the euro, dealers said.
The Czech 3x6 FRA <CZK3X6F=> slipped 2 basis points on the
day on Thursday after central bank Governor Miroslav Singer said
late on Wednesday that inflationary pressures existed but the
strong crown currency was taming them, and it was impossible to
say when rates would start to rise. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.229 24.194 -0.14% +3.18%
Polish zloty <EURPLN=> 3.895 3.88 -0.39% +1.62%
Hungarian forint <EURHUF=> 271.6 274.75 +1.16% +2.35%
Croatian kuna <EURHRK=> 7.41 7.408 -0.03% -0.4%
Romanian leu <EURRON=> 4.264 4.264 0% -0.73%
Serbian dinar <EURRSD=> 104.19 104.51 +0.31% +1.67%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 44bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +64bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +87bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +359bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +339bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +309bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -4 basis points to +509bps over bmk*
5-yr T-bond HU5YT=RR -19 basis points to +458bps over bmk*
10-yr T-bond HU10YT=RR -7 basis points to +401bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1627 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaux, writing by Marton
Dunai/Krisztina Than/Marius Zaharia; Editing by John Stonestreet
amd Susan Fenton)
