* Forint, crown pare gains, Serb dinar at all-time low
* Bank stress tests show region's banks healthy
* Romanian T-bill tender eyed later on Monday
(Adds bonds, new detail)
By Krisztina Than
BUDAPEST, July 26 (Reuters) - Eastern European currencies
mostly reversed their initial gains on Monday, suggesting that
optimism over the favourable results of stress tests carried out
on the region's banks may be short-lived.
Most of the region's units retreated slightly, with the
Czech crown <EURCZK=> down 0.2 percent and the Serb dinar off
0.2 percent at an all-time low. []
Bucking the trend, the Polish zloty <EURPLN=> held on to
gains and was still up 0.6 percent at 0947 GMT.
The Romanian leu <EURRON=> was a shade firmer, up 0.2
percent, with markets there eyeing the start of an IMF mission
to review Romania's 20 billion euros aid package and a tender to
sell 750 million lei in 6-month treasury bills.
The Hungarian forint <EURHUF=> was steady from Friday.
The forint has been an underperformer in the region after
last week's turmoil following the suspension of talks between
Hungary and its lenders. Dealers said the currency was likely to
remain volatile until the dust settles and details become known
about the 2011 budget and the government's policy plans.
The forint dropped on Friday as rating agency Standard &
Poor's and Moody's warned they might downgrade the country's
sovereign debt. []
A dealer in Budapest said the Hungarian currency was
expected to stay volatile in the coming weeks.
"I expect a range between 283-290 to the euro this week as
there is high event risk in the forint ... and many players are
waiting for a trigger to sell," a dealer said.
The release of European bank stress tests on Friday
afternoon appeared to show that central Europe's banks were
sound.
"As regards Central Eastern European countries, the two
Hungarian Banks (OTP and FHB) and the Polish bank PKO passed the
test very comfortably, with very high Tier 1 ratios even after
the stress," Unicredit said in a daily note on Monday.
"The top 7 international banking groups present in Central
Eastern Europe (UniCredit, RZB, Erste, OTP, SocGen, IntesaSP,
KBC) also passed the stress exercise. In summary, there is no
specific regional issue about the local banking sector - good
news for the region in this sense."
Europe-wide only seven of 91 banks failed the stress tests
-- five small Spanish banks, Germany's state-rescued Hypo Real
Estate and Greece's ATEbank. No listed bank failed.
[]
Budapest stocks <> were up 0.2 percent at 0956 GMT,
while the Prague bourse <> gained 0.8 pct and Warsaw <>
0.3 pct. Hungary's main lender OTP <OTPB.BU> was up 0.6 percent.
"A stronger zloty and stronger markets support debt. PKO
BP's positive showing in stress tests is also supporting
sentiment in the region," said a debt dealer Millenium SA bank,
Seweryn Bandura.
But analysts also said the optimism may be short-lived.
"Deficits and the weak recovery are still weighing on the
markets. Investors will remain cautious, and falls are much
quicker than gains in bond prices," said a debt dealer from
another Warsaw-based bank.
In another sign that the recovery remains weak, Hungarian
May retail sales data showed consumers were still not spending.
[]
ROMANIAN TENDER
Polish bonds were a couple of basis points firmer, Hungarian
yields were little changed from Friday, while in Romania traders
were waiting for the outcome of a six-month Treasury bill
tender.
Romania accepted yields above 7 percent for the first time
since May at a 10-year bond tender last Thursday, signalling it
will gradually agree to pay higher interest. []
"If they do that again today, it will boost (investor)
confidence," one trader said.
Analysts have said the ministry's strategy of trying to cap
yields at 7 percent and seek alternative short-term financing
from the money market was seen as unsustainable and raises
pressure on longer-term yields.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.151 25.109 -0.17% +4.64%
Polish zloty <EURPLN=> 4.043 4.068 +0.62% +1.51%
Hungarian forint <EURHUF=> 286.85 286.94 +0.03% -5.75%
Croatian kuna <EURHRK=> 7.243 7.248 +0.07% +0.91%
Romanian leu <EURRON=> 4.257 4.264 +0.16% -0.46%
Serbian dinar <EURRSD=> 105.54 105.3 -0.23% -9.15%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +2 basis points to 106bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +95bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +113bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +393bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +368bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +309bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +615bps over bmk*
5-yr T-bond HU5YT=RR +4 basis points to +572bps over bmk*
10-yr T-bond HU10YT=RR +3 basis points to +463bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1147 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux; Writing by Krisztina Than;
Editing by Hugh Lawson)
