Hungary's forint plunges to record low, bond yields jump



(Updates with market moves, Hungarian bond yields)

By Luiza Ilie and Anita Komuves

BUCHAREST/BUDAPEST, July 5 (Reuters) - The Hungarian forint plunged to a record low on Tuesday while long-term government bond yields jumped as global fears of recession and a firming dollar added to local concerns about a high budget deficit and a row with the European Union.

The forint was down 1.78% on the day and at 1405 GMT traded at 409.50 per euro, a new historic low. The currency is central Europe's worst performer as it has shed more than 9% versus the euro so far this year.

"The global mood is sour and the forint is the most vulnerable in the region, and will stay so until issues with the EU and the budget are resolved," an FX trader in Budapest said.

The forint has recently been pressured by a high budget deficit, the lack of agreement with the European Union over pandemic recovery funds, the introduction of a windfall taxes on banks and certain companies and soaring inflation, traders and analysts have said.

Last week the National Bank of Hungary raised its base rate by 185 basis points and its one-week deposit rate by 50 basis points, bringing both key rates to 7.75%. The forint jumped after the rate hikes but soon gave up its gains.

Long-term Hungarian government bond yields rose about 35-40 basis points on Tuesday and the yield on the 10-year benchmark bond was about 8.40%, a fixed-income trader said.

"After the big rate hike the market expected a turnaround in the forint's weakening trend, and local buyers appeared and yields dropped. But with the forint nearing 410, they are trying to get rid of what they bought last week," the trader said.

Elsewhere in the region, Polish and Romanian central bankers were expected to hike their benchmark interest rates this week.

The Polish zloty EURPLN= was 0.9% weaker, while the Romanian leu EURRON= , tightly controlled by the central bank, was flat.

In Romania, policymakers were expected to hike the key rate by 75 basis point to 4.50% on Wednesday, still the lowest among its regional peers.

Polish central bankers were also expected to hike by 75 basis points on Thursday.

"The zloty remains under moderate pressure from the external environment," Bank Millennium said in a note. "A 75bp rate hike consistent with the consensus would be relatively neutral for the zloty valuation."

Stocks in the region fell, tracking global markets, with Warsaw's .WIG20 blue chip index falling 3.24%. Budapest's equities shed 1.82% while Bucharest's .BETI fell 1%.

Markets in Prague were closed for a national holiday and were due to reopen on Thursday.

CEE

SNAPSH AT

MARKETS OT

1605

CET

CURREN

CIES

Latest Previo Daily Change

us

bid

close change in

2022 EURCZK Czech

<EURCZK 24.756 24.743 -0.05% +0.47 =

crown

=>

0

0

% EURHUF Hungary <EURHUF 409.50 402.20 -1.78% -9.79% =

forint =>

00

00

EURPLN Polish <EURPLN 4.7615 4.7185 -0.90% -3.58% =

zloty

=>

EURRON Romania <EURRON 4.9445 4.9460 +0.03 +0.07 =

n leu

=>

%

% EURHRK Croatia <EURHRK 7.5250 7.5275 +0.03 -0.10% =

n kuna =>

% EURRSD Serbian <EURRSD 117.30 117.38 +0.07 +0.24 =

dinar

=>

00

00

%

%

Note:

calculated from

1800

daily

CET

change

Latest Previo Daily Change

us

close change in

2022 .PX

Prague

.PX

1212.5 1212.5 +0.00

9

900

% .BUX

Budapes .BUX

38983. 39707. -1.82% -23.14

t

78

19

% .WIG20 Warsaw <.WIG20 1638.1 1693.1 -3.24% -27.74

>

8

0

% .BETI Buchare .BETI 12244. 12368. -1.00% -6.25%

st

81

83

.SBITO Ljublja <.SBITO 1112.9 1118.2 -0.47% -11.35 P

na

P>

2

1

% .CRBEX Zagreb <.CRBEX 1998.7 2003.0 -0.21% -3.88%

>

5

1

.BELEX Belgrad <.BELEX 843.81 838.45 +0.64 +2.81 15

e

15>

%

% .SOFIX Sofia

<.SOFIX 610.36 609.24 +0.18 -3.98%

>

%

Yield Yield Spread Daily

(bid) change vs

change

Bund

in

Czech

spread

Republi

c

CZ2YT=

<CZ2YT= 6.2230 -0.006 +578b +18bp RR

2-year RR>

0

ps

s CZ5YT=

<CZ5YT= 5.3410 -0.003 +446b +17bp RR

5-year RR>

0

ps

s CZ10YT

<CZ10YT 4.5750 -0.114 +337b +3bps =RR

10-year =RR>

0

ps

Poland

PL2YT=

<PL2YT= 7.8270 -0.007 +739b +18bp RR

2-year RR>

0

ps

s PL5YT=

<PL5YT= 7.1440 0.1530 +626b +33bp RR

5-year RR>

ps

s PL10YT

<PL10YT 6.6920 0.1070 +549b +25bp =RR

10-year =RR>

ps

s

FORWARD

3x6

6x9

9x12

3M

interb

ank

Czech

<CZKFRA

7.51

7.42

6.80

7.23

Rep

><PRIBO

R=>

Hungary <HUFFRA 10.83 11.15 11.14

8.51

><BUBOR

=>

Poland <PLNFRA

8.17

8.20

8.05

7.08

><WIBOR

=>

Note:

are for ask

FRA

prices

quotes

****************************************

**********************


Reporting by Luiza Ilie in Bucharest, Anita Komuves in Budapest and Pawel Florkiewicz in Warsaw; Editing by Barbara Lewis and Alison Williams

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