(Recast with new forint lows, Hungarian government bond yields jump, Romania’s central bank) By Alan Charlish and Krisztina Than WARSAW/BUDAPEST, July 6 (Reuters) – The forint plunged to new lows on Wednesday record highs as Hungarian government bond yields jumped as the country’s deteriorating risk profile and concerns over the future of EU fund flows added to global fears of a recession. The Polish zloty also weakened slightly as investors dumped risky assets amid concerns about a sharp economic slowdown as energy prices rise, central banks raise interest rates and the business climate is deteriorating. But the forint has been hammered, falling 2% on the day, and more than 11% so far this year, significantly underperforming the region. “Positive news regarding an agreement on EU funds and the impacts of fiscal and monetary tightening that cool domestic demand and improve the trade balance would be key conditions for ending the HUF’s underperformance in a negative external risk environment,” Citigroup said in a note. He said the National Bank of Hungary (NBH) had limited leeway to support the currency through interventions in the spot foreign exchange market, but could raise its one-week deposit rate to 7.75%. Thursday, during the next call for tenders. “As the BNH might try to save some ammunition for the rest of the month, we see a bit more chance for a 50bp hike tomorrow, but based on the June MPC communication, we don’t rule out no longer a 100 basis point hike to defend the currency,” he added. said. The central bank did not respond to questions emailed to Reuters. Hungarian bond yields jumped 40-45 basis points in the short term and 20-25 basis points on longer-dated securities, with the 10-year yield hitting 8.7% in the secondary market, said a trader. “Compared to what’s happening in the forint market, it’s still quite subdued in terms of yield movements, what we can see is that investors are trying to buy into the market occasionally, as they are looking for the peak,” the trader said, adding that the market was waiting to see the central bank’s next move. The forint weakened 2% against the euro at 4:16 a.m. 2:13 p.m. GMT, sliding to new record lows during the day. According to the debt management agency’s HUBONDFIX fixing, the yield on 5-year bonds jumped 44 basis points to 9.08%, and that on 3-year bonds rose further to 9.19%. Meanwhile, markets have grown more uncertain about whether Poland will actually receive COVID recovery funds from the European Union after criticizing reforms meant to unlock the money in Brussels. The zloty weakened 0.3% to 4.784, ahead of a rate-setting meeting on Thursday where analysts polled by Reuters expect the main rate to rise from 6.00% to 6.75%. The tightly central bank-controlled Romanian leu was stable after a rate-setting meeting in which Romania’s central bank carried out its largest interest rate hike in more than a decade, reducing the borrowing cost gap with other states in the region as it raised its short-term inflation expectations. Policymakers raised the benchmark ROINTR=ECI rate by one percentage point to 4.75%, above average market expectations, their seventh consecutive monthly rise since October. Prague markets were closed for a holiday. ECO SNAPSH AT 1559 CET MARKETS OT CURRENCIES Last Daily Change Previous US 2022 Supply Closing Change EURCZK Czech 0 0% EURHUF Hungary 00 00% EURPLN Polish EURRON Romania % % EURHRK Croatia % EURRSD Serbian 00 00 % % Note: Calculated from 1800 CET daily change Last Previo Daily Change us close change in 2022 .PX Prague 1212.5 1212.5 +0.00 9 900% .BUX Budapest 39169. 39256. -0.22% -22.77 t 34 26% .WIG20 Warsaw <.wig20> 1661.3 1644.4 +1.02 -26.72 > 16.72 6% % .BETI Bucara 12296. 12209. +0.71 -5.86% st 41 92% .SBITO Ljublja <.sbito p na> 2 7%% .CRBEX Zagreb <.crbex> 0 5 .BELEX Belgrade <.belex e> %%.SOFIX Sofia <.sofix> % Yield Yield Spread Daily (bid) exchange vs Bund exchange in Czech Republic spread CZ2YT= ps s CZ5YT= ps s CZ10YT ps s Poland PL2YT= 0 ps PL5YT= ps s PL10YT 0 ps FORWARD 3×6 6×9 9×12 3M interb ank Czech Hungary Poland Note : are for asking prices FRA ** ***************************************** ************* ********** (Reporting by Alan Charlish in Warsaw and Anita Komuves in Budapest; Editing by Kim Coghill and Alison Williams)