* Most CEE currencies up, only leu bucks the trend
* Hungary's bond yields jump up to 20 bps after auction
(Updates throughout)
By Sandor Peto and Dagmara Leszkowicz
BUDAPEST/WARSAW, Aug 26 (Reuters) - Central Europe's
currencies mostly rose on Thursday helped by a firmer euro while
Hungary's bond yields jumped after its auctions on concerns
over its fiscal outlook and its rejection of a new IMF deal.
Hungary sold 50 billion forints worth of three-, five- and
10-year bonds at auctions on Thursday, but a rise in yields and
lower demand indicated that confusing signals from Budapest in
the past few days about new talks with the IMF had hurt
sentiment on Hungarian assets. []
The forint <EURHUF=>, the region's worst-performing currency
behind the Serbian dinar <EURRSD=> this year, was bid at 283.1
against the euro at 1335 GMT, firming by 0.4 percent from
Wednesday.
Central European currencies were helped by a recovery in the
euro, the region's reference currency, versus both the dollar
<EUR=> and the volatile Swiss franc <EURCHF=>, dealers said.
The Polish zloty <EURPLN=> added 0.3 percent to 3.984
against the euro and was also supported by gains in equities as
stock markets across central Europe rose by between 0.5 percent
and 1.4 percent.
"Clearly, 3.98 is a quite strong support level on the zloty
and even a better than expected U.S. (labour market) data did
not manage to breach it," said Przemyslaw Winiarczyk, dealer at
Millennium bank. "I think that stock markets as well as the bond
market are two key drivers for the currency now."
The Czech crown <EURCZK=>, central Europe's top performer so
far in 2010, added 0.3 percent after one of the rate-setter made
a comment suggesting that a rate rise will still be discussed by
the central bank this year. []
Only Romania's leu <EURRON=> was a touch weaker, to bid at
4.249 against the common currency.
HUNGARIAN YIELDS RISE
The Polish bonds were relatively stable after a recent rally
when yields fell up to 40 basis points in the first three weeks
of August, before jumping almost 10 basis points at the start of
this week.
Hungary's bonds were weaker after the tender, with the
shorter-end of the curve being the most hit as yields rose
almost 30 basis points from Wednesday. The bond prices trimmed
some of their previous losses in the late trade, but still
remained well below Wednesday closing levels.
Dealers said sentiment at the bond auction was dented by
confusing comments from the government in the past two days
about new talks with the International Monetary Fund in the
autumn.
Budapest has said the talks would not lead to a new aid
deal, raising market concerns about the country's ability to
finance itself solely from the market from 2011.
Economists are now split down the middle over whether
Hungary -- which wants wiggle room in the 2011 budget for tax
cuts -- will at some point return to the IMF for aid.
[]
Hungary's central bank has also unnerved the market by
projecting higher inflation and slower economic growth in its
quarterly inflation report on Monday. It also said the
government needed to take measures to meet budget deficit
targets.
"The central bank's comments on Monday (about gloomier
domestic economic prospects) and the IMF stories leave bond
yields higher by about 45 basis points (in the past week) and
the forint weaker by about 5 forints (per euro)," one fixed
income trader said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.83 24.91 +0.32% +5.99%
Polish zloty <EURPLN=> 3.984 3.996 +0.3% +3.01%
Hungarian forint <EURHUF=> 283.1 284.25 +0.41% -4.5%
Croatian kuna <EURHRK=> 7.271 7.274 +0.04% +0.53%
Romanian leu <EURRON=> 4.249 4.242 -0.16% -0.27%
Serbian dinar <EURRSD=> 105.063 105.18 +0.11% -8.74%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to 116bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +116bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +113bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +393bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +383bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +320bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +27 basis points to +654bps over bmk*
5-yr T-bond HU5YT=RR +20 basis points to +587bps over bmk*
10-yr T-bond HU10YT=RR +7 basis points to +489bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1535 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Gergely
Szakacs/Sandor Peto/Dagmara Leszkowicz; Editing by Toby Chopra)
