* Hungarian assets rebound as HUF off record lows vs Swissie
* Hungary central bank warns a new IMF deal may be needed
* PMI indices in region mostly strong on German recovery
* Czech, Polish bond yields fall at auctions
* Volatility may stay high in fragile global mood
(Adds Hungary central bank comments, Czech top-up tender)
By Sandor Peto and Marius Zaharia
BUDAPEST/BUCHAREST, Sept 1 (Reuters) - Hungarian bond yields
rose on Wednesday after the central bank warned a new IMF deal
may be needed if sentiment soured, but yields were still lower
on the day as the forint rebounded against the Swiss franc.
Many Hungarian households have Swiss franc mortgages and the
forint's record lows against the franc, hit on Tuesday, have
threatened growth prospects, spooking markets and sending the
five-year bond yield to six-week highs.
But on Wednesday the forint firmed about 1.5 percent against
the franc to 219, sending bond yields around 25 basis points
lower in the morning. Yields rose about 10 basis points in
choppy trade after the central bank's warnings. []
The forint <EURHUF=> led central European currency gains
against the euro, having gained 0.8 percent by 1456 GMT, helped
by strong manufacturing data across the region []
and by a slightly better risk appetite abroad.
Elsewhere, the Polish zloty <EURPLN=> was up 0.6 percent,
while the Czech crown <EURCZK=> and Romania's leu <EURRON=> were
0.1-0.2 percent up.
However, central European assets remain highly exposed to a
rise in volatility in international markets in the past two
weeks, particularly Hungarian markets, traders said.
"These comments from the (central bank) have rattled our
nerves a bit," one dealer said. "We expect choppy trading for
the rest of the week, with markets still jittery. Any risk
aversion could push the forint to weaker levels again."
Hungary's government spooked investors in July when its
talks with the International Monetary Fund and the European
Union collapsed during a review of its existing funding deal.
SMOOTH AUCTIONS
Czech and Polish bond yields dropped at fresh auctions,
showing investors remain attracted by the higher debt yields
offered by relatively stable emerging economies.
"The sharp decline in core G3 yields has, in turn, increased
demand for higher-yielding CEEMEA debt instruments, leading to a
broad-based rates rally," Goldman Sachs said in a note.
At a 5-year bond auction in the Czech Republic, investors
bid for more than twice the offer, and the yield dropped to a
record low at 2.592 percent. [] []
The yield on the secondary market <CZ1002737=> fell about 10
basis points after the auction.
The ministry plans to offer 50 billion crowns in debt before
the end of 2010, less than earlier expected. []
Poland sold 4 billion zlotys worth of 2-year bonds at a
tender which attracted moderate demand, with the average yield
dropping to 4.672 percent from 4.759 percent a month ago.
[] Polish bonds were flat on the secondary market.
"The primary auction went well and the finance ministry did
not provide further supply (via a) top up auction," said Marek
Kaczor, bond dealer at PKO BP.
Polish central bank rate setter Elzbieta Chojna-Duch said
there was no need to hurry with monetary tightening
[], but dealers said the comments did not dispel
expectations for an interest rate hike by early next year.
Romanian government bond yields, however, rose 10 basis
points to 7.3-7.6 percent after the finance ministry signalled
on Tuesday that it would stick to a self-imposed 7 percent cap
on yields at debt tenders. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.702 24.729 +0.11% +6.54%
Polish zloty <EURPLN=> 3.97 3.992 +0.55% +3.38%
Hungarian forint <EURHUF=> 284.6 286.9 +0.81% -5.01%
Croatian kuna <EURHRK=> 7.25 7.273 +0.32% +0.82%
Romanian leu <EURRON=> 4.256 4.264 +0.19% -0.44%
Serbian dinar <EURRSD=> 105.49 105.077 -0.39% -9.11%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -4 basis points to 118bps over bmk*
7-yr T-bond CZ7YT=RR -19 basis points to +97bps over bmk*
10-yr T-bond CZ9YT=RR -8 basis points to +107bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +403bps over bmk*
5-yr T-bond PL5YT=RR -11 basis points to +386bps over bmk*
10-yr T-bond PL10YT=RR -14 basis points to +317bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -24 basis points to +642bps over bmk*
5-yr T-bond HU5YT=RR -26 basis points to +600bps over bmk*
10-yr T-bond HU10YT=RR -27 basis points to +522bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1656 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Gergely
Szakacs/Sandor Peto/Marius Zaharia, editing by Hugh Lawson/Ruth
Pitchford)
