* Romania, Hungary cut rates, join peers at record lows
* Leu, forint steady after cbank moves
* Czechs getting closer to eurobond, local market quiet
(Updates with Hungary rates, new prices)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, March 29 (Reuters) - The forint and leu held
steady on Monday after the Hungarian and Romanian central banks
cut interest rates to record lows to revive their economies from
recession.
Romania's key rate is now at 6.5 percent and Hungary's 5.5
percent. [] []
The two countries were among the hardest hit in the economic
downturn in central and eastern Europe and both have depended on
International Monetary Fund support in the financial crisis.
Weak inflation has allowed central banks to ease policy, or
in the case of the Czechs and Poles, who have much lower rates,
to likely put off policy tightening until the end of the year.
Analysts said Hungary could pause its rate cutting cycle
now, as parliamentary elections due on Apr. 11 and 25 would
increase uncertainty, but could resume cuts later in the year.
"The (Hungarian) bank's decision completely fits into the
trend of recent decisions by other emerging market central
banks," said Daniel Bebesy, of Budapest Bank said.
"The ongoing recovery could weaken the dovish camp within
the council, but it does not mean that the rate cut cycle is
over. Further cuts are possible especially in case of renewed
forint firming."
The forint <EURHUF=> steadied after the decision to bid at
265.62 to the euro, off two-week lows hit earlier in the
session. Bond yields were steady after hitting multi-year lows
this month.
The leu <EURRON=> was flat at 4.067 by 1342 GMT. Poland's
zloty <EURPLN=> led gains with a 0.6 percent rise to 3.887 per
euro, and the Czech crown <EURCZK=> eased a touch to 25.455.
Bucharest dealers said the central bank intervened last week
to knock the leu off a 14-month high. The unit joined the forint
and the zloty at highs last seen at the turn of 2008/2009.
The region's currencies have benefitted from investors
shifting positions to the region and its better picture on
growth and debt than euro zone peripherals like Greece, although
the spillover risk has not completely disappeared.
Debt-stricken Greece returned to capital markets on Monday
for the first time since euro zone leaders agreed to give it a
financial safety net. []
Czech and Hungarian elections this spring will also weigh on
on currencies in the coming months until markets see a strong
government formed and a clear view on policies, dealers say.
BONDS STABLE
Strategists expect an export recovery to help fuel currency
gains this year, and have tipped the zloty, backed by the only
EU economy to avoid recession last year, as an outperformer.
The Polish central bank is expected to leave rates unchanged
at a low of 3.5 percent on Wednesday. The Czechs kept rates at 1
percent last week, but did not rule out another cut.
Analysts expect interest rates in those countries to end
2010 at higher levels, but weak inflation and strong currencies
have skewed the outlook on timing.
Czech interest rate swaps stabilised on Monday at lower
rates, mostly on the short end. The 2-year IRS <CZKAM6PR2Y=> was
quoted 17 basis points lower than before the central bank
surprised markets with comments on still-possible policy easing.
Czech bonds also showed little reaction to weekend comments
from Finance Minister Eduard Janota that the government was
preparing a 1 billion euro bond, on the low end of a previous
range. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.455 25.437 -0.07% +3.39%
Polish zloty <EURPLN=> 3.887 3.91 +0.59% +5.58%
Hungarian forint <EURHUF=> 265.62 265.68 +0.02% +1.78%
Croatian kuna <EURHRK=> 7.261 7.26 -0.01% +0.66%
Romanian leu <EURRON=> 4.067 4.068 +0.02% +4.19%
Serbian dinar <EURRSD=> 99.73 99.61 -0.12% -3.86%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -3 basis points to 64bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +95bps over bmk*
10-yr T-bond CZ10YT=RR +2 basis points to +91bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +473bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +406bps over bmk*
10-yr T-bond HU10YT=RR +6 basis points to +379bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1443 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara
Leszkowicz/Jason Hovet; editing by Patrick Graham/Ruth
Pitchford)
