* Govt backs off Greece comments
* Stocks stay under pressure but off lows
* Forint, bonds rebound, markets still wary of spillover
* Other FX following forint, crown up after Fitch outlook
(Updates throughout)
By Jason Hovet
PRAGUE, June 7 (Reuters) - The forint bounced off a one-year low and Hungarian bond prices rose on Monday after the government rushed to calm market fears of a Greek-style crisis which had sent ripples through global assets late last week.
Hungary's leading bank OTP <OTPB.BU> recovered a more than 10 percent early plunge to trade flat on the day, but stocks remained under pressure amid reports the government planned a new bank tax to raise revenues. [
]The forint <EURHUF=> jumped 1.2 percent from Friday's local close to bid 284.5 per euro by 1413 GMT.
Budapest vowed on Monday to keep its budget deficit as close as possible to a target of 3.8 percent of GDP agreed with lenders, including the International Monetary Fund and EU, by cutting spending while at the same time lowering taxes.
The pledges were enough to give respite to markets pounded last week when officials from the ruling centre-right Fidesz party said the budget outlook was worse than thought and suggested the country was close to a Greek-style meltdown. [
]Markets remained on edge, however. Analysts said that while Hungary's fiscal and debt situation was far from Greece's, the country faces problems including a large amount of foreign currency loans and a tough task in convincing markets it can manage its debt.
"As long as the IMF and the EU are on board, there are no funding pressures. As long as they do not do anything foolish like cut taxes, they are fine," said Edwin Gutierrez, emerging debt fund manager at Aberdeen Asset Management in London.
Economy Minister Gyorgy Matolcsy however reiterated on Monday that the government planned to cut taxes.
Hungarian bond yields dropped 20-30 basis points from morning levels, with the yield on the three-year bond off a five-month high and long-end yields down from nine-month peaks.
Stocks <
> were down less than 1 percent, paring an earlier 5 percent drop to a near four-month low. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For the latest stories out of Hungary, click [ ] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>WATCHING THE BANKS
Moody's said on Monday that last week's comments by Hungarian officials about the country's fiscal situation were negative for Hungarian credit as they brought renewed attention to the country's high debt.
It added that the government's apparent willingness to explore unorthadox ways of funding the budget gap were cause for concern. [
]Online news portal Index reported that one fundraising option being considered is the introduction of a special tax on banks. That hit Budapest shares. [
]Erste Group Bank <ERST.VI>, one of the largest lenders in central Europe, dropped 1.7 percent. Prague stocks <
> lost 1.8 percent and Bucharest's share market < > was down 1.3 percent.But currencies rebounded with the forint.
The Polish zloty <EURPLN=> gained 0.8 percent, tracking the forint higher. The Romanian leu <EURRON=> was down 0.4 percent while the Czech crown <EURCZK=> fell on profit-taking, erasing early gains triggered after Fitch raised its outlook on its Czech rating on Friday. [
]Concerns about Hungary's fiscal situation have raised contagion fears that analysts say will not likely be realised.
Those concerns have also kept up pressure on central Europe's reference currency the euro <EUR=> which hit its lowest level in more than four years on Monday. Oil prices also fell earlier in the day and worries about Hungary sent the yield on Germany's 10-year Bund, seen as a safe haven, to a record low.
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 on Monday it would be difficult to get funding without aid after CDS prices jumped 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.
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today in 2010 Czech crown <EURCZK=> 25.964 25.96 -0.02% +1.36% Polish zloty <EURPLN=> 4.144 4.176 +0.77% -0.97% Hungarian forint <EURHUF=> 284.5 287.86 +1.18% -4.97% Croatian kuna <EURHRK=> 7.258 7.259 +0.01% +0.71% Romanian leu <EURRON=> 4.231 4.213 -0.43% +0.15% Serbian dinar <EURRSD=> 103.32 102.94 -0.37% -7.2% Yield Spreads Czech treasury bonds <0#CZBMK=> 2-yr T-bond CZ2YT=RR -2 basis points to 160bps over bmk* 7-yr T-bond CZ7YT=RR +1 basis points to +170bps over bmk* 10-yr T-bond CZ9YT=RR 0 basis points to +172bps over bmk* Hungarian treasury bonds <0#HUBMK=> 3-yr T-bond HU3YT=RR -13 basis points to +634bps over bmk* 5-yr T-bond HU5YT=RR -23 basis points to +608bps over bmk* 10-yr T-bond HU10YT=RR -19 basis points to +534bps over bmk* *Benchmark is German bond equivalent. All data taken from Reuters at 1614 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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