* Hungary sells more debt than planned, yields jump
* Currencies inch higher, ECB meeting eyed
(Recasts with Hungary tender, quotes, details)
By Marius Zaharia
BUCHAREST, Dec 2 (Reuters) - The forint led mild gains in
emerging Europe on Thursday after Hungary sold more debt than
planned at a tender, albeit at sharply higher yields, while
other currencies edged up ahead of a key ECB meeting.
Hungary surprised by selling 51 billion forints worth of
government bonds, 11 billion more than planned, with the average
yield rising by up to almost 1 percentage point from two weeks
ago for the shorter-term dated paper [].
Some analysts had expected the tender to fall short of plans
as a government plan to scrap private pension funds was seen
eliminating the key source of stable domestic debt demand.
"We need to see that these yields are only better than the
recent peaks," said Sandor Jobbagy of CIB Bank. "It's possible
that we have reached a ceiling in yields for now, but that also
depends a lot on the global mood."
"The yield trajectory is further undermined by the Hungarian
government's latest measures, as well as the fiscal
uncertainties, which is reflected in a steeper yield curve as
the market priced in long term uncertainties."
Currencies held on to previous session's gains but trade was
thin as investors awaited to see if the European Central Bank
would take any measures to ease debt worries.
At 1109 GMT, the forint <EURHUF=> was up 0.4 percent, while
the Romanian leu <EURRON=>, the Czech crown <EURCZK=> and the
Polish zloty <EURPLN=> were a touch higher.
Regional currencies could track the euro lower if the ECB
disappoints, with the most fiscally-fragile states Hungary and
Romania, likely to be hit more than others, traders said.
"We could see (upwards) pressure on CEE rates and a surge in
CDS levels in Hungary and Romania as European peripheral spreads
widen again, and we could witness a further steepening of the
Hungarian yield curve," BNP Paribas said in a note.
"We therefore maintain our bearish view of Hungarian assets
and also on the Romanian leu."
GOOD DATA
Polish debt was stable, but some traders said bonds were in
a firming bias due to a raft of good data in the past weeks.
"Both the Polish data and the economic surrounding seem to
be supportive for the Polish debt, particularly for the
longer-end of the curve," said Adrian Skubij, fixed income
dealer at ING bank in Warsaw.
"So it looks like playing on a flattening of the curve may
be profitable."
Assets gained across the region on Wednesday after Poland,
Hungary and the Czech Republic all posted strong PMI growth,
alleviating some of the fiscal worries in the region and
boosting bets for a steady economic recovery in emerging Europe.
The data added to arguments for the Polish central bank to
start tightening its policy, but rate-setters in the Czech
Republic said interest rates were unlikely to rise anytime soon.
Hungary's vice governor Ferenc Karvalits told national radio
that the central bank was likely to raise borrowing costs
further but the tempo of any moves would depend on economic data
[]
The bank surprised markets with a 25 basis point rate hike
on Monday, raising the key interest rate to 5.5 percent from an
all-time low of 5.25 percent where it had been for the preceding
six months. []
Romania published final GDP data on Thursday, confirming a
flash estimate of a 2.5 percent contraction in the third
quarter, caused mainly by austerity measures taken by the
government over the summer. []
In Hungary, September's final trade figures showed a 540
million euros surplus, a touch below a preliminary estimate
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.926 24.98 +0.22% +5.58%
Polish zloty <EURPLN=> 3.997 4.007 +0.25% +2.68%
Hungarian forint <EURHUF=> 278.34 279.4 +0.38% -2.87%
Croatian kuna <EURHRK=> 7.422 7.422 0% -1.52%
Romanian leu <EURRON=> 4.288 4.292 +0.09% -1.18%
Serbian dinar <EURRSD=> 107.26 107.17 -0.08% -10.61%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to 102bps over bmk*
7-yr T-bond CZ7YT=RR +8 basis points to +94bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +99bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +381bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +355bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +318bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -4 basis points to +682bps over bmk*
5-yr T-bond HU5YT=RR -17 basis points to +612bps over bmk*
10-yr T-bond HU10YT=RR -15 basis points to +527bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1109 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 Ron Askew)
