* FX, stocks post heavy losses; Hungary yields up 35-40 bps
* Greece, Portugal downgrades hit CEE assets
* Poland's central bank keeps rates on hold as expected
(adds Polish cbank, quote, updates prices)
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 decision to leave interest rates unchanged.
Regional stocks fell around 2 percent and Hungary's forint
<EURHUF=> broke above 270 per euro to a nine-week low. It led
currency losses in the region, having dropped more than 1
percent from the previous close at one stage.
By 1101 GMT it had recovered some losses, trading at 270.37
per euro, 0.5 percent weaker on the day.
Markets fear debt-laden Greece may not secure aid in time to
meet a deadline of May 19 when a maturing bond needs to be
refinanced. 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.
Comments from the European Union Commission ruling out a
Greek debt restructuring and saying talks on a 45 billion euro
IMF/EU aid package would be finalised in coming days helped
currencies recover some of their earlier losses.
The Polish zloty <EURPLN=> fell 0.3 percent, while the Czech
crown <EURCZK=> and Romanian leu <EURRON=> were down by a touch.
Hungarian bond yields rose 35-40 basis points from Tuesday.
POLAND HOLDS RATES
In Poland the central bank left interest rates unchanged at
its first rate-setting meeting after the death of Governor
Slawomir Skrzypek in a plane crash earlier this month.
[]
The zloty and bonds were unaffected and markets await a news
conference explaining the decision at 1300 GMT.
"A hawkish statement would be inconsistent with the MPC's
attempts to slow the (zloty) appreciation, though the importance
of this factor recently diminished as lower risk appetite
externally diminished the pressure," said Rafal Benecki, senior
economist at ING Bank.
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.
Greek woes have put a post-election rally of Hungarian
assets into reverse. Hunagary's president said he would propose
Viktor Orban, the leader of the centre-right Fidesz party which
won 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.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.588 25.577 -0.04% +2.85%
Polish zloty <EURPLN=> 3.945 3.933 -0.3% +4.03%
Hungarian forint <EURHUF=> 270.37 268.96 -0.52% -0.01%
Croatian kuna <EURHRK=> 7.245 7.249 +0.06% +0.89%
Romanian leu <EURRON=> 4.139 4.134 -0.12% +2.38%
Serbian dinar <EURRSD=> 99.3 99.15 -0.15% -3.44%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 68bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +84bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +83bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +382bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +325bps over bmk*
10-yr T-bond PL10YT=RR -5 basis points to +272bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +33 basis points to +469bps over bmk*
5-yr T-bond HU5YT=RR -4 basis points to +426bps over bmk*
10-yr T-bond HU10YT=RR +36 basis points to +393bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1401 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia,
editing by Ian Jones)
