* Risk appetite falls, forint leads FX down
* Fitch financing reports adds to pressure
* ECB will not accept CEE bonds as collateral-HU cbanker
* Polish 2-yr bond yields rise 5 bps after CPI
* Regional GDP data due out on Friday
(Adds cbanker, quotes, Polish CPI)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, May 14 (Reuters) - The forint fell to a
two-week low after Fitch ratings agency placed Hungary among the
most vulnerable to external financing risks, while bond yields
rose across central Europe as investors cut risk.
Poland's inflation release showing prices rose more than
expected by 4 percent on the year in April [] sent
two-year bond yields higher by 5 basis points and strengthened
chances rates will remain on hold for a while.
Emerging European stock markets fell more than 1 percent
early before paring losses, although renewed concern the global
economic recovery remained distant hit market sentiment.
Investors awaited first quarter GDP data in the region on
Friday, and while data on Thursday showed a slowing decline in
Czech retail sales in March, analysts said it still showed a
rough drop for the export-led economy. []
In Hungary, one of three European Union members to get
external aid in the downturn, the forint <EURHUF=> fell 1.5
percent from Wednesday's domestic close, bidding at 287.85 to
the euro by 1341 GMT.
The forint rose last week to a nearly four-month high, up
more than 13 percent from a March 6 low of 317.45 to the euro.
But it has reversed sharply this week with a shift in risk
sentiment following weak U.S. retail sales on Wednesday, which
broke a string of more upbeat reports on the economy.
"Given the worsening of risk sentiment in the last two days,
we think the markets are likely to test the forint once again
sending EUR/HUF back above 300," Danske Bank wrote in
recommendation to sell the Hungarian unit.
Hungary's central bank Deputy Governor Julia Kiraly said
that despite higher rates than regional peers, radical cuts were
not likely in order to protect the currency. []
Kiraly said the European Central Bank has rejected several
central European banks' request to accept non-euro zone, local
currency bonds as collateral, but traders and strategists said
there was no immediate market impact.
"A positive answer by the ECB regarding any potential
expansion of the collateral list could be a nice boost on the
liquidity channel of CE banks," Commerzbank's Luis Costa said.
"But I don't believe this is a huge blow."
Hungarian bond yields also climbed over 20 basis points on
Thursday, and dealers said a Fitch report on central Europe's
external financing risk piled onto the harsher sentiment.
RISKS STILL THERE
Fitch Ratings said on Thursday countries like Hungary, which
has a large current account deficit and foreign currency debt,
were among most exposed to external funding risk. []
In Poland, the zloty <EURPLN=> dropped 0.4 percent to 4.465
to the euro, falling more as ambitious euro entry hopes fade.
Central banker Jan Czekaj was the latest official on
Thursday to cast doubt on the government's 2012 euro adoption
timetable, saying entry to proving guide ERM-2 was not likely
this year. []
The Czech crown <EURCZK=> touched a 3-week low on Thursday,
and Romania's leu <EURRON=> fell 0.2 percent to 4.185 per euro.
In Romania, a finance minister official said the country's
IMF-led loan package helped improve funding conditions for an
eurobond, which may be issued this year. []
"This might be slightly positive for bonds, yields could
ease slightly," said Vlad Muscalu of ING Bank in Bucharest.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.862 26.839 -0.09% -0.41%
Polish zloty <EURPLN=> 4.465 4.446 -0.43% -7.84%
Hungarian forint <EURHUF=> 287.85 283.44 -1.53% -8.44%
Croatian kuna <EURHRK=> 7.364 7.348 -0.22% +0.01%
Romanian leu <EURRON=> 4.185 4.175 -0.24% -4.08%
Serbian dinar <EURRSD=> 94.65 94.845 +0.21% -5.46%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 165bps over bmk*
4-yr T-bond CZ4YT=RR +5 basis points to +204bps over bmk*
8-yr T-bond CZ8YT=RR +6 basis points to +284bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +450bps over bmk*
5-yr T-bond PL5YT=RR +6 basis points to +358bps over bmk*
10-yr T-bond PL10YT=RR +7 basis points to +313bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +23 basis points to +909bps over bmk*
5-yr T-bond HU5YT=RR +25 basis points to +846bps over bmk*
10-yr T-bond HU10YT=RR +25 basis points to +737bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1641 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
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(Reporting by Reuters bureaus, writing by Jason Hovet/Marius
Zaharia; editing by Andy Bruce)
