CEE MARKETS 1-Hungary keeps investors on edge, stocks fall

                                
 * Govt backs off Greece comments, pledges to hold budget
                                
 * Stocks continue to fall, OTP shares suspended
                                
 * Forint, bonds tread water, markets wait for more
                                
 * Other FX following forint, crown up after Fitch outlook
                                
 
                                
 PRAGUE, June 7 (Reuters) - The forint steadied on Monday
after attempts by Hungary's government to calm fears of a
Greek-style crisis, but reports of a new bank tax caused shares
in the country's leading bank to plunge.
                                
 Hungarian bond yields were mixed with long-end yields just
off nine-month highs and dealers said the market was treading
water until more news came out.
                                
 The forint <EURHUF=> slipped 0.3 percent from Friday's local
close to 288.68 per euro, just off a one-year low.
                                
 Stocks <.BUX> dropped more than 4 percent by 0801 GMT to
near a four-month low. The bourse suspended trade in shares of
OTP Bank <OTPB.BU> for a second session in a row after its
shares dropped more than 10 percent.
                                
 Hungary's new, centre-right Fidesz government rattled
investors last week with comments suggesting the country was
close to a Greek-style economic meltdown. [ID:nLDE6550I7]
                                
 Most economists believe Hungary is far from becoming another
Greece, noting its budget deficit and public debt ratios are
much lower. But analysts said the gaffes highlighted how close
investors are watching Europe's debt crisis, which has hung over
central European assets.
                                
 "Bonds are at Friday's levels or slightly firmer, but the
market is very illiquid," a dealer said.
                                
 "The assessment of the weekend developments tends to be
positive, but people are waiting for further news. Nobody wants
to sell, but there is no buying either."
                                
 Hungary's government said on Saturday it aimed to meet this
year's budget deficit target of 3.8 percent of GDP goal agreed
with international lenders, including the International Monetary
Fund and EU.
                                
 State secretary Mihaly Varga said Hungary's previous
socialist governments had hidden the true fiscal shortfall and
additional measures would be needed to reach the goal.
                                
 But on Monday, investors said there were mixed signals when
Economist Minister Gyorgy Matolcsy said 1.0-1.5 percent of GDP
in spending cuts were still needed but reiterated a government
plan to cut taxes.
                                
 "The damage has already been done, but in case Fidesz sticks
to the 3.8 percent figure and comes up with a sensible fiscal
correction plan it will be able to ease some of the pressure on
markets," 4Cast analyst Gabor Ambrus said in a note.
                                
 Online news portal Index reported that one fundraising
option being considered is the introduction of a special tax on
banks, triggering the big sell-off in OTP shares and dragging
down the whole index. [ID:nLDE6560I2]
                                
 Other currencies in the region traded off the forint, with
the Polish zloty <EURPLN=> and Romanian leu <EURRON=> flat,
while the Czech crown <EURCZK=> edged up 0.3 percent following a
raised outlook by credit ratings agency Fitch on Friday.
[ID:nLDE6530IP]
                                
 
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2010 
Czech crown      <EURCZK=>   25.885   25.96   +0.29%   +1.67%
Polish zloty     <EURPLN=>    4.175    4.176  +0.02%   -1.7%
Hungarian forint <EURHUF=>  288.68   287.86   -0.28%   -6.35%
Croatian kuna    <EURHRK=>    7.261    7.259  -0.03%   +0.66%
Romanian leu     <EURRON=>    4.215    4.213  -0.05%   +0.53%
Serbian dinar    <EURRSD=>   103.3   102.94   -0.35%   -7.18%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +4 basis points to  166bps over bmk*
7-yr T-bond   CZ7YT=RR   +4 basis points to  +173bps over bmk*
10-yr T-bond   CZ9YT=RR   +2 basis points to  +174bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +6 basis points to  +653bps over bmk*
5-yr T-bond   HU5YT=RR    -8 basis points to  +634bps over bmk*
10-yr T-bond   HU10YT=RR +12 basis points to  +565bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1004 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.

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 (Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Toby Chopra)