* FX lower as euro, fiscal concerns weigh on region
* Hungary bond auction yields up on doubts over reforms
* Polish bonds firm a tad on cbanker comments
* Equities fall, Hungarian shares underperform
(Adds new comments and prices)
By Dagmara Leszkowicz and Sandor Peto
WARSAW/BUDAPEST, Feb 10 (Reuters) - Hungarian bonds gave up
more ground on Thursday as optimism over planned government
reforms abated, while the euro's fall against the dollar also
weakened currencies in Central Europe.
The fall of assets in the European Union's emerging markets
was broad-based -- hitting currencies, bonds and equities -- as
the region's reference unit, the euro, and western European
shares also fell. [] []
"Obviously weakness across the region is caused by moves on
the euro/dollar. But currencies, particularly those from
countries with fiscal problems, are really under pressure now,"
said Thu Lan Nguyen, FX analyst at Commerzbank.
Only the region's safe-haven currency, the Czech crown, and
Polish government bonds bucked the trend. The latter firmed
moderately, helped by signs from one policymaker that the
central bank may deliver fewer rises in interest rates this year
than the market currently expects.
The crown <EURCZK=> rebounded after falling near a key
support level at 24.3 against the euro, and at 1501 GMT it was
bid at 24.189, firmer by 0.1 percent over the day.
Poland's zloty <EURPLN=>, meanwhile, fell 0.6 percent to
3.928 versus the euro, Hungary's forint <EURHUF=> 0.4 percent to
272.59 and Romania's leu <EURRON=> 0.2 percent to 4.262.
Budapest stocks <>, which have outperformed regional
peers in Warsaw <> and Prague <> in 2011, have given back
most of this year's gains in the last three sessions, indicating
that Hungarian assets remain vulnerable to bouts of risk
aversion in Europe.
The blue chip BUX index fell over 2 percent on Thursday.
HUNGARIAN BONDS RETREAT
Hungarian bonds had also had a strong start to 2011, but the
tide may have turned, some payback for six months of
unconventional policy that has drawn criticism from the European
Union, the pension industry and Budapest's central bank.
The country smoothly sold all of the bonds offered at
Thursday's auctions <HUAUCTION02> but the average yield rose by
6-26 basis points from auctions held two weeks ago, with the
long end of the curve rising most.
Market participants said profit-taking was triggered by
growing concerns that the government's reform package to be
announced this month will not solve underlying structural
problems in the state budget. []
SEB recommended buying the zloty against the forint as the
latter had rallied against the euro and the zloty due to
exaggerated optimism over the Hungarian reforms.
"By now, there is room for disappointment, which is the most
likely scenario we think," the bank said. []
While the zloty joined the regional asset falls, Polish
government bond yields dropped a few basis points as central
bank rate setter Adam Glapinski said Poland needed one or at
most two more rate increases, each by 25 basis points and only
in the second half of 2011. []
Polish 9x12 forward rate agreements -- which show where
markets project rates in the next nine months -- indicate
another 100 basis points of tightening by the bank with a slight
chance for more.
"The (Glapinski) interview strengthened Polish debt as the
comments are clearly dovish," a Warsaw-based dealer said. "It
looks like it is not only Glapinski's view, but also some other
members of the MPC, those who see the tightening cycle much
smaller than the market anticipates."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.189 24.217 +0.12% +3.35%
Polish zloty <EURPLN=> 3.928 3.905 -0.59% +0.76%
Hungarian forint <EURHUF=> 272.59 271.47 -0.41% +1.98%
Croatian kuna <EURHRK=> 7.412 7.41 3 +0.01% -0.43%
Romanian leu <EURRON=> 4.262 4.252 -0.23% -0.68%
Serbian dinar <EURRSD=> 102.96 103.01 +0.05% +2.88%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to 37bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +76bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +75bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +357bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +331bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +301bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +14 basis points to +516bps over bmk*
5-yr T-bond HU5YT=RR +15 basis points to +481bps over bmk*
10-yr T-bond HU10YT=RR +13 basis points to +426bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1601 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz;
Editing by Patrick Graham)
