* Hungary's assets underperform, Czech crown more resilient
* Fed comments dent markets, local CPI data have no impact
* Hungary assets buoyed on mid-term by EM inflow - analyst
By Krisztina Than and Marton Dunai
(Adds bonds, analyst, new comments, updates markets)
BUDAPEST, Aug 11 (Reuters) - Hungarian assets led losses in
emerging Europe on Wednesday while the Czech crown outperformed
after U.S. Federal Reserve comments dented global risk appetite.
As investors shifted to safer assets after the Fed's
acknowledgement that the U.S. economic recovery had slowed,
Hungarian government bond yields rose by about 10 basis points
from late Tuesday levels and the forint was 1.0 percent weaker
than the close of the previous session.
Hungary holds a forint debt auction on Thursday and a debt
agency official said on Wednesday that Budapest would try to tap
international markets for 3.5 billion euros next year.
[]
Polish bonds, meanwhile, were flat, and the zloty <EURPLN=>
had lost 0.7 percent by 1059 GMT. The Czech crown <EURCZK=>
ticked 0.5 percent lower and the Romanian leu <EURRN=>, which
typically tracks regional peers more loosely, was flat.
While Hungary's reputation has been tarnished by after a
spat with international lenders, medium-term interest in
emerging markets has buoyed its assets, said Nomura analyst
Peter Attard Montalto.
"Sentiment towards Hungary is certainly lagging the rest of
the region but that is irrelevant when emerging market funds are
seeing huge inflows which they have to deploy," he said. "Even
if they are underweight Hungary they still have to buy it."
"I think the Fed move will simply reinforce the flow of
money into emerging market funds and onwards into the region as
people extend duration and look for carry ... regardless of
sentiment."
The Fed's statement overshadowed mixed inflation data from
the region. Hungary's consumer price index dropped to 4 percent
as a 2009 VAT hike exited the base []. In Romania,
inflation surged to 7.1 percent on a VAT hike [].
"The CPI data had no impact, it is the dollar which is
driving (the market)," a Budapest-based currency dealer said.
The Czech crown got a boost after the new government won a
confidence vote on Tuesday and S&P upgraded its credit outlook
on the Czech Republic. []
Markets view the austerity-minded Prague administration as
positive, making Czech assets a safe haven. []
Stocks fell across the region with the Budapest bourse
<> down 0.8 percent at 1040 GMT, with Warsaw <> and
Prague <> equity indices 1.0 percent lower each.
HUNGARIAN BONDS SLIP
Hungary's bonds lagged the region, with yields rising about
10 basis points in weak trading, a dealer said.
"If the current summer lull persists, Thursday's bond
auction will be much weaker than the previous two bond sales,"
she added. "Especially with this risk aversion, I don't expect
huge demand."
Hungary offers 50 billion forints of debt for sale at a
regular auction on Thursday. <HUISSUE> It raised the amount sold
at the previous two bond tenders on good demand.
Budapest will also seek to raise 3.5 billion euros on
international markets next year, the deputy chief of the debt
agency said on Wednesday. []
He added that Hungary would have to satisfy its forint
financing needs for that to be enough, but said he was confident
that refinancing current debt would pose no problems in 2011 and
2012. Analysts have warned of pressure on yields if appetite for
the country's debt recedes.
In Poland, the only country in Europe to escape recession in
the recent crisis, bond markets shrugged off the Fed comments
and were little changed.
"(The Fed's warning) is not yet translating into (an impact
on) Polish bonds," one Warsaw-based dealer said. "But I expect
falling prices later in the session."
Polish central bank Governor Marek Belka said on Tuesday
that he was more concerned about the zloty sharply appreciating
than depreciating. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.839 24.708 -0.53% +5.95%
Polish zloty <EURPLN=> 4.006 3.978 -0.7% +2.45%
Hungarian forint <EURHUF=> 282.29 279.52 -0.98% -4.23%
Croatian kuna <EURHRK=> 7.22 7.217 -0.04% +1.24%
Romanian leu <EURRON=> 4.236 4.236 0% +0.03%
Serbian dinar <EURRSD=> 104.75 104.89 +0.13% -8.47%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +3 basis points to +89bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +111bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +101bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +4 basis points to +413bps over bmk*
5-yr T-bond PL5YT=RR +8 basis points to +394bps over bmk*
10-yr T-bond PL10YT=RR +6 basis points to +332bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +13 basis points to +599bps over bmk*
5-yr T-bond HU5YT=RR +20 basis points to +557bps over bmk*
10-yr T-bond HU10YT=RR +18 basis points to +470bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1259 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
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(Reporting by Krisztina Than; Editing by Susan Fenton/Ruth
Pitchford)
