* Markets await Hungary action plan after Greece comments
* Forint off 1-year low, OTB holds gains amid bank tax noise
* Hungary sells all of T-bill offer, yield up from week ago
* Trade choppy, to stay volatile
(Adds T-bill result, Hungary bank tax, updates prices)
By Jason Hovet
PRAGUE, June 8 (Reuters) - The forint dipped on Tuesday and
shares in Hungary's largest bank pared gains as investors
awaited confirmation of details of government plans designed to
calm fears the country was struggling to control its finances.
Hungarian Prime Minister Viktor Orban was due to speak later
in the day. His government pledged on Monday to cut spending and
aims to hold the budget deficit at a 3.8 percent of annual
economic output target agreed with lenders.
According to unconfirmed reports, the government plans to
introduce a flat personal income tax of 16 percent from 2011, a
15 percent cut in wage costs at public institutions, and a tax
on banks.
In its first big test of market sentiment this week, the
country sold all 45 billion forints of 3-month T-bills on offer,
with the average yield up 7 basis points from last week to 5.26
percent, []
Analysts and dealers expect choppy trade after comments last
week from government officials suggesting that Hungary was close
to a Greek-style debt crisis, which dragged down central Europe
and hit global assets like the euro and oil. []
The forint <EURHUF=> bid 0.2 percent down at 285.35 per euro
by 1013 GMT, off a one-year low near 290 hit on Friday but down
3.5 percent since late Wednesday. Bonds held early gains.
Romania's leu <EURRON=> and the Czech crown <EURCZK=> rose
0.2 percent. The Polish zloty <EURPLN=> was down 0.1 percent.
Orban was due to outline details from an economic action
plan in a speech in Parliament at 13:00 local time (1100 GMT).
"At these levels, clients are more willing to sell (euro vs
forint), but activity is very low," a dealer said in Budapest.
"We await the Orban speech, but don't expect miracles from
it. The forint is rather vulnerable, it will not be nearly as
easy to calm investors as it was to send the forint into a
nosedive with a couple of ill-advised comments."
Budapest stocks <>, after rising 1.5 percent early, fell
back more than 1 percent on the day.
Leading bank OTP <OTPB.BU> stayed on positive ground but
gave up more than half its earlier 4 percent rise after a Fidesz
ruling party MP said the government wanted to include a bank tax
as part of its revenue-raising measures. []
On Tuesday, news portal Index reported Hungary's government
has likely abandoned the idea of channelling private pension
funds into the state budget as a form of raising revenues due to
opposition from the IMF and the European Union. []
* For a TAKE A LOOK on Hungary, double-click []
HUNGARY NOT GREECE
While analysts say Hungary's debt woes are far less serious
than those of Greece and fund investors have yet to flee Hungary
and central Europe entirely, the region was unlikely to recover
quickly and trade would stay volatile. []
"We reiterate our opinion that markets previously
overreacted," SEB said in a trade note in which it also
recommended buying a euro/zloty put spread.
"With volatility likely to remain elevated in the near term
but given the fundamentally unjustified contagion from Hungary
to the zloty and our bullish view on the zloty in the medium-
and long-term we released (the) recommendation," it said.
The International Monetary Fund chief and euro zone finance
ministers downplayed market fears on Monday. []
Fund managers also said on Monday Hungarian politicians had
been clumsy in their attempts to warn voters of austerity
measures, adding the comments were designed for a domestic
audience.
Analysts expect central European economic growth to outpace
that of western EU members this year, though the pace is still
dependent on trade to the euro zone.
Romania's adjusted industrial output growth slowed in April,
hit by a choppy recovery in the euro zone and further denting
hopes the economy will exit recession this year. []
Bucharest dealers said investors were on the sidelines
before a government no-confidence vote for proposed pay cuts
next week, crucial to its own IMF-led aid package.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.942 26.00 +0.22% +1.45%
Polish zloty <EURPLN=> 4.151 4.145 -0.14% -1.13%
Hungarian forint <EURHUF=> 285.35 284.9 -0.16% -5.26%
Croatian kuna <EURHRK=> 7.243 7.252 +0.12% +0.91%
Romanian leu <EURRON=> 4.228 4.235 +0.17% +0.22%
Serbian dinar <EURRSD=> 103.44 103.31 -0.13% -7.31%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 163bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +175bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +171bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1214 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 Jason Webb, John Stonestreet)
