* Forint hit by comments on IMF, hits all-time low vs CHF
* Leu stable as Senate backs VAT hike
* Polish bonds regain part of pre-auction losses
(Updates with Polish auction, CHF/HUF)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, Aug 25 (Reuters) - The forint erased early
gains on Wednesday after Hungary ruled out a new International
Monetary Fund loan agreement, while Polish bonds were stronger
following a switch sale of longer-dated paper.
Other emerging European currencies were kept steady by an
improving economic outlook in trade partner Germany, but the
forint weakened after the midday statement to fall into negative
territory on the day but off Tuesday's lows.
The economy ministry, clarifying comments from late on
Tuesday, said on Wednesday that autumn talks with the IMF would
be a regular country review and that a new loan was not needed
after an existing deal expires later this year. []
The latest statement came after ruling Fidesz party
Vice-Chairman Lajos Kosa said on TV2 in the morning that Hungary
will stay in touch with the IMF and it will negotiate with the
European Union about an economic and fiscal path that would be
acceptable to the country. []
Many investors have ditched Hungarian assets this week
because of risk aversion, and analysts have said a new aid
safety net would help cushion Hungarian financial markets.
So far, however, with the exception of brief episodes of
volatility, markets have refrained from punishing the government
ahead of local elections in October, hoping it would reverse its
opposition to more IMF aid after that.
"The forint fell after the Economy Ministry said there will
be no new (financing) deal with the IMF," one Budapest-based
dealer said. "The forint has become quite volatile... but I
don't think that it would break through 286 (to the euro)."
Hungarian bond yields jumped as much as 10 basis points
after the ministry statement. The forint <EURHUF=> fell 0.5
percent on the day to bid at 284.15 to the euro by 1419 GMT.
RBC strategist Nigel Rendell said the forint would stay in
the 280-290 per euro range in the near term.
"The government has blown hot and cold with the IMF," he
said. "The market will only be happy with a hard deal in place."
The forint hit a new all-time low of 219.23 against the
Swiss franc <CHFHUF=> on Wednesday, increasing worries about the
pace of an economic recovery as a large chunk of Hungarian
household loans is denominated in the Swiss unit.
The Swiss currency hit an all-time high versus the euro on
Wednesday and was seen rising further as worries about euro zone
debt increased [].
POLISH BONDS
In Poland, bond prices slightly rose after the bond switch
tender as some investors did not manage to get the papers they
wanted during the auction and tried to buy into them on the
secondary market, dealers said. []
Even though yields in 5- and 10-year bonds fell 2 basis
points after the tender they were still higher on the day.
"Some investors sold papers in hope of buying them cheaper
during the tender," a Warsaw-based trader said. "Some of them
did not get what they wanted so they bought some papers after
the tender so prices rose."
Poland faces likely record borrowing this year, but its
paper remains attractive as it is seen as an opportunity to
invest in a relatively stable economy which offers high returns
at a time when German Bund yields trade at record lows.
The Polish zloty <EURPLN=> was virtually flat on the day,
while the Czech crown <EURCZK=> dipped 0.1 percent.
In Romania, the leu <EURRON=> was stable after the upper
house of parliament backed a hike in value added tax (VAT)
viewed as vital to keeping an IMF-led rescue on track, but the
government faces a tight parliamentary vote next month.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.88 24.866 -0.06% +5.78%
Polish zloty <EURPLN=> 4.008 4.008 0% +2.4%
Hungarian forint <EURHUF=> 284.15 282.75 -0.49% -4.86%
Croatian kuna <EURHRK=> 7.274 7.28 +0.08% +0.48%
Romanian leu <EURRON=> 4.241 4.238 -0.07% -0.08%
Serbian dinar <EURRSD=> 105.17 105.26 +0.09% -8.83%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 117bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +118bps over bmk*
10-yr T-bond CZ9YT=RR -6 basis points to +116bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +391bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +381bps over bmk*
10-yr T-bond PL10YT=RR +10 basis points to +323bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -20 basis points to +575bps over bmk*
5-yr T-bond HU5YT=RR -12 basis points to +546bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +479bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1519 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Stephen Nisbet)
