* 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
(Updates prices, adds comments)
By Jason Hovet
PRAGUE, June 7 (Reuters) - The Hungarian forint steadied
just off a one-year low on Monday after Budapest tried to calm
fears of a Greek-style crisis, but reports of a new bank tax
kept up pressure on shares in the country's leading bank.
Hungarian bond yields were mixed with the yield on the
three-year bond at a five-month high and long-end yields just
off nine-month peaks. The forint <EURHUF=> edged up 0.3 percent
from Friday's local close to 287.01 per euro.
"The scare has dissipated, the panic is over. If the forint
pares its losses some more and CDS prices normalise, investors
will reconsider around the world how little basis this scare
really had, the market will return to normalcy once again," one
fixed income trader said. []
"(But) it will take much longer than the weakening took."
Stocks <> were down 2.5 percent by 0937 GMT, paring
earlier 5 percent losses but 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 before trying to back
off those comments over the weekend. []
Most economists believe Hungary is far from becoming another
Greece, noting its debt ratios are much lower.
Moody's, however, said on Monday that comments by Hungarian
officials last week were negative for Hungarian credit as they
brought renewed attention to the country's high debt.
[]. And Analysts said a fast market recovery was
unlikely.
Economy Minister Gyorgy Matolcsy said on Monday that 1.0-1.5
percent of GDP in spending cuts were still needed but reiterated
a government plan to cut taxes.
Hungary's government said on Saturday it aimed to meet a
deficit target of 3.8 percent of GDP 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.
"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.
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For the latest stories out of Hungary, click []
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WATCHING THE BANKS
Online news portal Index reported that one fundraising
option being considered is the introduction of a special tax on
banks, hitting Budapest shares. []
Other shares in the region followed suit with Erste Group
Bank <ERST.VI>, one of the largest lenders in central Europe,
dropping 1.5 percent. Prague stocks <> lost 1.7 percent and
Bucharest <> was down 2.3 percent.
Concerns about Hungary's fiscal situation kept up pressure
on central Europe's reference currency the euro <EUR=> which hit
its lowest level in more than four years.
The Polish zloty <EURPLN=>, however, edged up 0.4 percent
and the Romanian leu <EURRON=> was flat while the Czech crown
<EURCZK=> added 0.5 percent after Fitch raised its outlook on
its Czech rating on Friday. []
Analysts were split on whether the forint could bounce back
any time soon. []
Hungary was forced to seek a $25 billion international aid
package at the start of the financial crisis in October 2008.
Commerzbank said it would be difficult to get financing without
this aid after CDS prices jumped to above 400 bps.
"The risk of a renewed debt crisis has risen and as a result
a recovery of the forint is unlikely," its analysts said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.828 25.96 +0.51% +1.9%
Polish zloty <EURPLN=> 4.161 4.176 +0.36% -1.37%
Hungarian forint <EURHUF=> 287.01 287.86 +0.3% -5.8%
Croatian kuna <EURHRK=> 7.26 7.259 -0.01% +0.68%
Romanian leu <EURRON=> 4.215 4.213 -0.05% +0.53%
Serbian dinar <EURRSD=> 103.33 102.94 -0.38% -7.21%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 162bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +170bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +173bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +17 basis points to +663bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +636bps over bmk*
10-yr T-bond HU10YT=RR +3 basis points to +556bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1140 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)
