* Forint under further pressure after Thursday's fall
* Zloty flat, crown, leu eases on politics
(Adds further details including bonds, new prices.)
By Sandor Peto
BUDAPEST, June 4 (Reuters) - Central European assets fell on
Friday as risk aversion increased with the euro's <EUR=> retreat
against the dollar, while concerns over Hungary's budget and the
new government's plans weighed on the forint <EURHUF=>.
The forint had already fallen on Thursday due to comments
from a government politician that the country had a slim chance
of avoiding a Greek-style crisis.
The comments by Hungarian government party Fidesz vice
president Lajos Kosa directed attention at a country so far not
mentioned as part of the European Union's debt crisis, but which
is still under the scrutiny of the IMF and EU after seeking a
bailout in October 2008.
Analysts mostly dismissed Kosa's comments saying comparisons
with Greece were misleading and wrong.
Most of Central Europe's assets gave up early gains by
mid-Friday as the euro was unable to break out from levels close
to 4-year lows and markets were waiting for key U.S. employment
figures.
The forint <EURHUF=>, which fell more than two percent
against the euro after the Kosa comments on Thursday, weakened
further by 0.85 percent by 1038 GMT to 283.40.
Dealers and analysts said local markets remained nervous as
the comparison with Greece hit confidence even though Hungary's
public debt at 80 percent of GDP was well below Greek levels.
"It peaks at a high level compared to other emerging markets
but Hungary is not Greece unless Fidesz sets off on a route of
large scale, unfinanced tax cuts," SEB analyst Mats Olausson
said in a note.
The new government said on Friday that it would present an
action plan in the next days, soon after it releases a report on
the budget which it said could have a deficit twice as much as
the former government's target of 3.8 percent. []
Hungarian government bond yields which surged by about 30
basis points on Thursday, rose further. The yield of three-year
bonds rose by 25 basis points to 6.85 percent on Friday.
"The future hinges on what the government will say," one
trader said. "I expect them to say that spending will be cut as
of July to bring down the deficit to the region of 5 percent."
GROWTH, BUDGETS EYED
Poland's zloty <EURPLN=> gave up all of its early gains and
was flat at 4.118 against the euro, still outperforming the
region. The Czech crown <EURCZK=> shed 0.3 percent, while the
Romanian leu <EURRON=> weakened by 0.4 percent.
Poland's economic growth around 3 percent remains robust,
but other countries in the region struggle to return to economic
growth as recovery in their western European export markets is
slow, and recession has weighed on their budgets.
Czech President Vaclav Klaus asked right-wing Civic Democrat
leader Petr Necas on Friday to lead talks on forming the next
government after centre-right parties won a decisive victory in
an election last weekend. []
The Civic Democrats have been negotiating with two new
centre-right parties on forming a coalition, but have run into
problems on issues such as taxation and fighting corruption.
Markets had cheered the election outcome, seeing a
centre-right government as the best option to reign in yawning
budget deficit in the coming years.
In Romania, investors weighed up an upcoming confidence vote
in the government over IMF-backed cost cutting measures needed
to lift the country out of recession.
The vote, over backing the planned cuts of 25 percent in
public sector wages and 15 percent in pensions, is expected next
week and could provoke further protests and strikes and delay
the next tranche of a 20 billion euro aid package.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.869 25.805 -0.25% +1.74%
Polish zloty <EURPLN=> 4.118 4.117 -0.02% -0.34%
Hungarian forint <EURHUF=> 283.4 281 -0.85% -4.6%
Croatian kuna <EURHRK=> 7.255 7.259 +0.06% +0.75%
Romanian leu <EURRON=> 4.212 4.197 -0.36% +0.6%
Serbian dinar <EURRSD=> 102.81 102.64 -0.17% -6.74%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -5 basis points to 132bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +158bps over bmk*
10-yr T-bond CZ9YT=RR +8 basis points to +152bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +404bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +361bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +295bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +24 basis points to +618bps over bmk*
5-yr T-bond HU5YT=RR +32 basis points to +603bps over bmk*
10-yr T-bond HU10YT=RR +13 basis points to +517bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1238 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters buros, writing by Sandor Peto; Editing
by Toby Chopra)
