* Hungarian assets fall on govt tax/pension plans
* Hungarian long-end bond yields up about 30 bps
* Forint fall curbs zloty gains, stocks fall in region
* Serbian cbank raises rate to 9.5 pct from 9.0
(Recasts with Hungarian market falls, impact on region)
By Dagmara Leszkowicz and Sandor Peto
WARSAW/BUDAPEST, Oct 14 (Reuters) - Hungarian assets fell on
Thursday on the government's plan to launch new taxes and
channel private pension fund revenues into the state budget,
also dragging down Poland's zloty from morning highs.
Hungary's measures, aimed at meeting budget deficit goals,
are seen hurting economic recovery [], while Poland
remains Central Europe's most robust economy even though its
budget deficit will be well above forecasts. []
Hungary's forint <EURHUF=> eased half a percent against the
euro by 1158 GMT, as it rebounded from the 274.50 level.
The losses of Hungarian government bonds deepened, with
yields rising 10-30 basis points as the yield curve steepened.
Mainly long-end papers suffered, with 10-year benchmark bonds
trading at 6.95 percent, up 31 basis points from Wednesday.
"People have been scared by the government plans about the
pension funds, which are seen cutting demand (for Hungarian
bonds)," one trader said.
"According to our calculations the average demand impact at
next year's auctions will not be huge, but much will depend (in
the market) on how the government debt agency will change its
issuing plans... and what rating agencies will say about the
budget plans," the trader added.
The government plans to channel 420 billion forints in
pension savings from private pension funds into its own coffers
until the end of 2011, and to impose new taxes on the energy,
telecoms and retail sectors. []
The stocks of Hungary's Magyar Telecom <MTEL.BU> fell 4
percent by 1210 GMT, oil group MOL <MOLB.BU> shed 0.5 percent as
Budapest's main stock index <> shed one percent. Prague's
<> stock index dropped 0.5 percent and Warsaw's <> shed
0.3 percent.
ZLOTY ALSO RETREATS
Appetite for assets in emerging markets including Central
Europe has risen in the past weeks amid stronger expectations
that the U.S. Federal Reserve will pump cheap funds into markets
later this year to help economic growth.
But investors continue to watch the European Union's debt
crisis. Among the bloc's emerging markets Hungary is a weak spot
as its debt is high relative to regional peers and a dragging
recovery makes hard for the country to outgrow debt.
"The economy will slow (due to the planned tax measures) and
if it does slow, what are long-term yields doing at the current
levels?," said one Budapest-based bond trader.
Poland confirmed on Thursday that its 2010 budget deficit
will be much higher than forecast, though it would not rise
above 8 percent of gross domestic product.
That's well above Hungary's 3.8 percent target for this year
and 3 percent for 2011, but Poland's state debt is much lower
and economic growth prospects much better than Hungary's.
The zloty <EURPLN=> retreated from morning highs, dragged
down by the forint's fall, but was still bid 0.1 percent firmer
from Wednesday.
"It is following the forint," one Warsaw-based dealer said.
Dealers said earlier that expectations for central bank
interest rate hikes, privatization inflows and the global risk
appetite could lift the zloty further, though the 3.85 level
could be a resistance.
Elsewhere in the region, the Czech crown <EURCZK=> and the
Romanian leu <EURRON=> both firmed 0.1 percent against the euro.
Both units gave up most of their early gains.
The dinar <EURRSD=> of Serbia, which is not an EU member,
firmed 0.1 percent to 105.991 after the central bank raised its
benchmark interest rate to 9.5 percent from 9.0 percent in an
expected move aimed at taming rising inflation. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.445 24.457 +0.05% +7.66%
Polish zloty <EURPLN=> 3.91 3.914 +0.1% +4.96%
Hungarian forint <EURHUF=> 273.86 272.55 -0.48% -1.28%
Croatian kuna <EURHRK=> 7.325 7.33 +0.07% -0.22%
Romanian leu <EURRON=> 4.278 4.276 -0.05% -0.95%
Serbian dinar <EURRSD=> 105.991 106.14 +0.14% -9.54%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -7 basis points to 76bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +98bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +98bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +10 basis points to +553bps over bmk*
5-yr T-bond HU5YT=RR +19 basis points to +526bps over bmk*
10-yr T-bond HU10YT=RR +29 basis points to +465bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1358 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara
Leszkowicz/Sandor Peto; Editing by Toby Chopra, John
Stonestreet, Ron Askew)
