* FX, stocks post heavy losses; Hungary yields up 35-40 bps
* Greece, Portugal downgrades hit CEE assets
* Poland's central bank seen keeping rates on hold
By Marius Zaharia
BUCHAREST, April 28 (Reuters) - Central European assets took
a beating across the board on Wednesday as Greek debt woes
spooked investors and drew attention away from a Polish central
bank meeting on interest rates.
Regional stocks fell more than 2 percent and Hungary's
forint <EURHUF=> broke above 270 per euro to a nine-week low. It
led currency losses in the region as it dropped nearly 1 percent
from Tuesday's close by 0936 GMT, while bond yields rose in
Hungary and the Czech Republic.
Markets fear debt-laden Greece may not secure aid in time to
meet a debt deadline on May 19, and central European assets have
been under heavy selling pressure since late on Tuesday when
Standard & Poor's downgraded Greece to junk status.
Greece's rating is now on a par with Romania's, but below
ratings in other central European countries. Greek government
bond yields hit new euro zone highs on Wednesday [].
Portugal was also downgraded on Tuesday, raising fears other
euro zone members may soon face similar problems and hitting
risk appetite in emerging Europe, despite the region's better
debt picture.
"Given the seriousness of the (Greece) situation, we
recommend investors to stay away from the CEE markets for now,
especially Romanian, Bulgarian and Hungarian markets, as the
risk of a further negative spill-over effect is significant,"
Danske Bank said.
The Polish zloty <EURPLN=> fell 0.4 percent, while the Czech
crown <EURCZK=> and Romanian leu <EURRON=> fell 0.2 percent
each. Hungarian bond yields rose 35-40 basis points from
Tuesday.
POLAND TO HOLD RATES
In Poland, the central bank holds its first rate-setting
meeting after the death of Governor Slawomir Skrzypek in a plane
crash earlier this month, but the focus is likely to remain on
Greece.
Markets have priced in a decision to leave rates unchanged
at a record low of 3.5 percent. []
Analysts say bonds and equities will face most of the
selling pressure as Greek woes spill over to central Europe but
some say investors may run to safer assets in countries like the
Czech Republic.
"We continue to see Czech, Russian and Turkish equities
providing relative 'protection' to the increasingly heavy
spillover," Cheuvreux strategist Simon Quijano-Evans said in a
morning note.
Hungary's forint showed its biggest daily drop this year on
Wednesday, falling more than 2 percent and putting a
post-election rally in reverse.
Hunagary's president said he would propose Viktor Orban, the
leader of the centre-right Fidesz party which wone a two-thirds
majority in Sunday's vote run-off, as the country's next prime
minister. []
In the Czech Republic, 10-year bond yields <CZ9YT=RR> have
shot up 40 basis points this week to an April high.
Dealers said rising supply will start to weigh on markets in
coming months after comments from Finance Minister Eduard Janota
on Tuesday about further measures to keep the 2010 state budget
deficit in line with the target. []
Some dealers also said the ministry may have missed a
financing window by limiting issuance at the start of the year
and not yet going ahead with a planned eurobond.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.622 25.577 -0.18% +2.72%
Polish zloty <EURPLN=> 3.947 3.933 -0.35% +3.98%
Hungarian forint <EURHUF=> 271.33 268.96 -0.87% -0.36%
Croatian kuna <EURHRK=> 7.249 7.249 0% +0.83%
Romanian leu <EURRON=> 4.141 4.134 -0.17% +2.33%
Serbian dinar <EURRSD=> 99.327 99.15 -0.18% -3.47%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +4 basis points to 71bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +88bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +85bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +384bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +328bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +274bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +36 basis points to +472bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +429bps over bmk*
10-yr T-bond HU10YT=RR +38 basis points to +395bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1236 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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emerging market news []
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(Reporting by Reuters bureaus, writing by Marius Zaharia,
editing by Neil Stempleman/Susan Fenton)
