* Zloty gains most as stress tests show CEE banks healthy
* Romanian T-bill tender cut again, Hungary closely watched
(Adds Romania tender, quotes)
By Krisztina Than and Marius Zaharia
BUDAPEST/BUCHAREST, July 26 (Reuters) - The Polish zloty
outpaced its east European peers to hit five-week highs on
Monday, boosted by respectable stress tests results for regional
banks, while Romania cut another debt tender as the IMF reviewed
its finances.
Other regional currencies gave up morning gains, suggesting
that optimism over the favourable results of stress tests
carried out on the region's banks was not strong enough to
offset uncertainty over state budgets in Hungary and Romania.
The Hungarian forint continued to underperform after last
week's turmoil triggered by the suspension of talks between the
government and international lenders. Dealers expect it 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. []
"Many players are waiting for a trigger to sell," a dealer
in Budapest said.
In Romania, markets have been under pressure recently due to
lingering uncertainty over the success of the centrist
government's austerity measures, which include a VAT hike that
could rekindle inflation, thus putting pressure on funding
costs.
That pressure was felt at a debt tender on Monday, when
Romania sold just over a third of the planned amount, sticking
to its self-imposed cut-off yield of 7 percent, a tactic which
analysts say could be scrapped from next month. []
"The ministry probably hopes for some positive messages
after the (July 26-Aug. 4) IMF mission in Romania ends that
could ease some of the pressure on yields," said Nicolaie
Alexandru-Chidesciuc, ING Bank chief economist in Bucharest.
"But I don't think it is going to happen and it will
probably start paying higher yields from next month."
The Czech crown <EURCZK=> shrugged off both stress test
results and broader regional worries and was stable. Dealers
said there was little room for it to firm beyond current levels,
where central bankers have launched verbal interventions in the
past.
AT 1348 GMT, the zloty <EURPLN=> was up 0.9 percent, taking
most advantage of improved investor optimism and helped by an
outperforming Polish economy. The Romanian leu <EURRON=> was up
0.2 percent, while the forint <EURHUF=> was 0.2 percent weaker.
"The way their economy has been performing, it is quite
natural that the zloty gets the bulk of the flows," one dealer
in Bucharest said.
STRESS TESTS
The results of European bank stress tests, released on
Friday afternoon, appeared to show that central Europe's banking
system was sound.
Hungarian bank OTP <OTPB.BU> had the second-highest tier one
capital ratio out of 91 EU banks tested. Polish bank PKO
<PKOB.WA> and Hungarian bank FHB <FHBK.BU> also passed easily.
Those banks' shares gained up to 2.5 percent on Monday,
leading the region's bourses higher.
"There is no specific regional issue about the local banking
sector - good news ... in this sense," UniCredit said in a note.
But analysts also said the optimism may be short-lived.
"Deficits and the weak recovery are still weighing on the
markets (and) investors will remain cautious," said a debt
dealer in Warsaw.
In another sign of a weak recovery, Hungarian May retail
data showed consumers were still not spending. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.115 25.109 -0.02% +4.79%
Polish zloty <EURPLN=> 4.032 4.068 +0.89% +1.79%
Hungarian forint <EURHUF=> 287.4 286.94 -0.16% -5.93%
Croatian kuna <EURHRK=> 7.243 7.248 +0.07% +0.91%
Romanian leu <EURRON=> 4.254 4.264 +0.24% -0.39%
Serbian dinar <EURRSD=> 105.49 105.3 -0.18% -9.11%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 105bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +93bps over bmk*
10-yr T-bond CZ9YT=RR -6 basis points to +105bps 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 1548 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 and
Marius Zaharia; Editing by Susan Fenton)
