* Currencies move little, euro periphery weighs on mood
* Forint, Hungary bonds ease briefly on budget figures
(Updates with FX rebound, fresh quote)
By Sandor Peto and Marius Zaharia
BUDAPEST/BUCHAREST, Nov 9 (Reuters) - Central European
currencies tracked a rebound in the euro to trade a tad stronger
on Tuesday, but worries of a spillover from fringe euro zone
debt problems and weak Hungarian budget figures weighed.
Markets were focusing on surging yields and debt insurance
costs in Portugal and Ireland and feared a gloomier outlook in
the euro zone's periphery may sway investors to ditch central
European assets as well.
The region's debt is much lower than in many western
European countries, but financing worries remain as governments
struggle to contain budget deficits and countries including
Romania and Hungary have needed aid from the International
Monetary Fund.
Hungary's budget data earlier this week showed the deficit
swelled to 131 percent of the full-year target in October.
[]
Traders said the strength of the Swiss franc against the
euro <EURCHF=> is also reminding investors of the financial
stability risks stemming from a huge amount of Swiss franc loans
by Hungarian households.
"This has an impact on us," one Budapest-based bond trader
said. "(Also) yesterday's budget figures were very bad."
The government's move to curb the Constitutional Court's
powers also highlights political risks, a dealer in Budapest
said. []
"Political uncertainty drags on the forint, as does the
stuttering economy," he said. "Any time there's a hiccup,
investors find us among the first. Plus, we base our recovery on
the euro zone, which is in trouble itself."
At 1448 GMT, the Polish zloty <EURPLN=> was 0.6 percent
higher on the day, the Hungarian forint <EURHUF=> traded 0.3
percent up, while the Czech crown <EURCZK=> was flat.
Bond yields were mostly flat after having jumped some 5
basis points at the start of the session.
CZECH RATES
A lower-than-expected October inflation reading in the Czech
Republic reinforced expectations for an interest rate hike
shifting further into the future. []
"(October inflation) result supports the view that interest
rates should certainly remain stable in the coming months, which
shifts the point of rate increase into the second half of the
next year," Patria Finance chief economist David Marek said.
The Czech central bank has recently cut its growth outlook
due to fiscal cuts and said its forecasts imply a rise in rates
in the second half of next year.
The region's largest listed company, Czech power group CEZ
<> said on Tuesday it was cutting its investments by 78
billion crowns ($4.4 billion) over the next four years to focus
on the domestic market and combat persistently low power prices.
In Romania, the leu <EURRON=> edged up in thin trade. On
Monday, debt managers sold one-year T-bills at yields of up to
7.3 percent, overshooting a six-month-old yield cap for the
second time in a row.
"Nobody is selling euro/leu with confidence, we have
economic problems," the Bucharest-based trader said. "You've got
huge (euro zone) periphery risk now."
"Plus the finance ministry has finally sold at 7.3 percent.
In theory, it means higher carry, but in practice higher rates
means higher debt so you have to buy EURRON."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.566 24.548 -0.07% +7.13%
Polish zloty <EURPLN=> 3.91 3.933 +0.59% +4.96%
Hungarian forint <EURHUF=> 273.7 274.55 +0.31% -1.22%
Croatian kuna <EURHRK=> 7.357 7.349 -0.11% -0.65%
Romanian leu <EURRON=> 4.283 4.287 +0.09% -1.06%
Serbian dinar <EURRSD=> 107 106.913 -0.08% -10.39%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +7 basis points to 81bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +95bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +112bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +389bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +374bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +327bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +564bps over bmk*
5-yr T-bond HU5YT=RR +5 basis points to +538bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +472bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1448 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux, writing by Marton Dunai/Sandor
Peto/Marius Zaharia, Editing by Sujata Rao/Ruth Pitchford)
