* Hungary's forint hit by plan to rewrite central bank law
* Zloty eases on BGK bond mandate, S&P, current a/c news
(Updates throughout)
By Radu Marinas and Dagmara Leszkowicz
BUCHAREST/WARSAW, April 11 (Reuters) - Hungary's forint fell
on Monday after ruling party Fidesz announced plans to rewrite
the central bank law, while the zloty eased after rating agency
S&P said Poland's public finances would need structural reform.
News late on Friday that Poland's state-owned bank BGK had a
mandate to intervene on the bond market also weighed on the
zloty, as did comments by a Polish central bank official, who
said a June revision of 2010 data would involve an increase in
the current account deficit of at least one percent of GDP.
[]
In Hungary, Fidesz said it would rewrite the rules that
govern the National Bank by the end of 2011, a move that
analysts said could include sensitive areas, but was not likely
to threaten the bank's independence. []
"At first sight the market's interpretation was that they
want to remove (central bank governor Andras) Simor," one
Budapest-based dealer said, adding that the market later calmed
down and the forint trimmed some of its previous losses.
In Poland, the head of the finance ministry's debt
department said on Friday that BGK had been mandated to
intervene on the bond market to soothe potential tensions.
[]
"The issue now is credibility. The Ministry of Finance has
said it would receive (interest rate swaps) on numerous
occasions and then did not," Peter Attard Montalto of Nomura
said in a note.
"Now it says it will buy bonds but will that actually
materialise?" he asked.
By 1433 GMT the forint <EURHUF=> eased 0.6 percent to 265.00
while the zloty <EURPLN=> fell 0.2 percent against the euro.
The Czech crown <EURCZK=> and Romanian leu <EURRON=> were
each a touch stronger after national inflation data.
INTEREST RATES
Consumer prices rose less than expected in February in the
Czech Republic but domestic demand remains weak and rates are
seen staying flat for now. In Romania, prices surged.
[]
Markets are closely watching the region's central banks and
inflation data due this week for signs they may follow the
European Central Bank's rise in interest rates last week.
Economists are still counting on a first Czech interest rate
rise by the midpoint of the year, and markets have also priced
in this scenario. []
Analysts have revised their earlier expectations of rate
cuts in Romania and now expect the bank to keep rates unchanged
at a record low of 6.25 percent until the end of the year.
The more hawkish rate view was supported by Monday's data
showing Romanian annual inflation accelerated to 8 percent in
March from February's 7.6 percent, above market expectations.
[]
In Poland, S&P rating agency criticised the "relaxed fiscal
stance" of the government, which faces elections in October, and
its decision to divert some funds from the second, private
pension fund pillar of the national pension scheme into the
state-run pay-as-you-go (PAYG) system.
"While this adjustment will help to reduce the government's
headline deficit and debt burden, in our view it will not
improve the long-term sustainability of the public finances,"
said Standard & Poor's credit analyst Moritz Kraemer.
[].
On the bond markets, Hungarian bonds tracked the forint,
easing across the curve, while the Polish papers were flat.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.427 24.435 +0.03% +2.35%
Polish zloty <EURPLN=> 3.969 3.962 -0.18% -0.28%
Hungarian forint <EURHUF=> 265 263.35 -0.62% +4.9%
Croatian kuna <EURHRK=> 7.364 7.344 -0.27% +0.22%
Romanian leu <EURRON=> 4.105 4.107 +0.05% +3.12%
Serbian dinar <EURRSD=> 101.38 101.34 -0.04% +4.49%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +3 basis points to -13bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +44bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +59bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +312bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +292bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +265bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +428bps over bmk*
5-yr T-bond HU5YT=RR +6 basis points to +388bps over bmk*
10-yr T-bond HU10YT=RR +8 basis points to +353bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1633 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; Editing by Ruth Pitchford)
