* Lack of detail on spending cuts disappoints investors
* Forint and Hungary stocks fall, bond yields rise
* OTP Bank shares fall on bank tax plan
* Other FX off highs
(Adds detail on Hungary, updated bonds, currencies, stocks)
By Jason Hovet and Sam Cage
PRAGUE/BUCHAREST, March 1 (Reuters) - Hungary's forint and
stocks fell and bond yields rose on Tuesday after Budapest
unveiled a reform plan lacking much of the detail markets had
counted on.
Hungarian assets have rallied this year on bets a plan to
save billions and set finances on a sustainable path would
prevent the country's debt rating from falling to junk status.
The forint had gained and bond yields fell in the morning
session ahead of the midday press conference which investors had
expected to lay out details of the fiscal reform package. The
lack of those triggered some profit-taking, analysts said.
"The plan was not really what markets wanted to see,
especially in line with earlier comments that real savings
measures would start to be delivered already in 2011," said
Elisabeth Gruie, strategist at BNP Paribas.
"There was a real desire in the market for these things to
be delivered immediately, and this lack of detail was somewhat
of a disappointment for investors."
Economy Minister Gyorgy Matolcsy said the government would
take measures to improve the budget balance by 900 billion
forints by 2013, and drive down public debt to 65-70 percent of
GDP by the end of 2014 from around 80 percent now.
He expected the budget deficit to decline to 2.2 percent of
GDP by 2013, below the European Union's 3 percent ceiling, and
said the planned measures will trim 550 billion forints off the
deficit next year. []
Markets were unimpressed, with the forint wiping earlier
gains and bidding 0.5 percent down on the day at 272.63 to the
euro by 1450 GMT. Bond yields rose by up to 10 basis points
after the reform announcement, then stayed rangebound as the
market digested the details.
The drop in Hungary on Tuesday weighed on other currencies
in the region, with the Polish zloty <EURPLN=> falling 0.2
percent. The Czech crown <EURCZK=> was flat and the Romanian leu
<EURRON=> inched down 0.1 percent.
"So far it is nothing more than empty phrases," said Carolin
Hecht, currency analyst at Commerzbank, said of the Hungarian
announcement. "What markets did expect was how the government
was going to go about implementing those targets. There is still
potential for EUR/HUF to go upward."
News portal hvg.hu reported late on Monday the package would
meet market expectations, but many of the details from sources
in the report were not confirmed. []
BANK, PHARMA STOCKS HIT
Budapest stocks <> fell more than 1 percent, giving up
some of the past few weeks' strong gains, pulled down by
drugmakers Egis <EGIS.BU> and Richter <GDRB.BU> -- hit by
government plans to slash drug spending -- and OTP Bank
<OTPB.BU>.
OTP, by far Hungary's biggest lender, fell 3 percent after
the government announced that it would keep a windfall bank tax
in place longer than previously planned.
Analysts and dealers have warned over the past month that
the reforms could disappoint investors, and the forint has
struggled to hold 3 percent gains seen since the beginning of
the year in volatile trade in that time.
Investors see the centre-right government's reform plans as
critical after Hungary shook markets last year by eschewing
International Monetary Fund advice in favour of a pro-growth
campaign of cash-generating measures. []
The Czech Finance Ministry said on Tuesday it would offer 50
billion crowns ($2.84 billion) worth of state bonds in seven
auctions in the second quarter, 10 billion crowns more than
planned for the first quarter. []
Markets also digested a dip in manufacturing indexes in
Poland and the Czech Republic. [] []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.307 24.319 +0.05% +2.85%
Polish zloty <EURPLN=> 3.972 3.962 -0.25% -0.35%
Hungarian forint <EURHUF=> 272.63 271.4 -0.45% +1.96%
Croatian kuna <EURHRK=> 7.42 7.418 -0.03% -0.54%
Romanian leu <EURRON=> 4.206 4.201 -0.12% +0.64%
Serbian dinar <EURRSD=> 103.69 103.37 -0.31% +2.16%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -9 basis points to 16bps over bmk*
7-yr T-bond CZ7YT=RR -12 basis points to +76bps over bmk*
10-yr T-bond CZ9YT=RR -8 basis points to +79bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +350bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +339bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +303bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +500bps over bmk*
5-yr T-bond HU5YT=RR +3 basis points to +462bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +410bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1550 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus)
($1=195.99 Forint)
