* Zloty stays under pressure but off lows
* Bond markets look to new Czech bond, Polish cbank
(Adds details, bonds)
PRAGUE, Sept 30 (Reuters) - The Polish zloty rebounded from
early lows on Wednesday but remained under pressure after
concern grew over the country's rising debt levels, putting a
drag on other central European currencies even as stocks jumped.
The zloty <EURPLN=> was up 0.3 percent to bid at 4.22 to the
euro by 0921 GMT, but traded at its lowest since Sept 14 at
4.2475 early in the session, extending losses after a 1 percent
drop in the previous session.
Central European stocks jumped 1-2 percent, following
western peers up.
On Tuesday, the Polish central bank said in a report that
the country's debt could top the constitutional cap of 55
percent of gross domestic product next year, which would trigger
public spending cuts. []
"The zloty is looking vulnerable," said a central European
currency dealer in Stockholm. "The debt story is the key driver
for people to get off the zloty at the moment."
The zloty has not traded weaker than 4.25 to the euro since
July, and dealers said a break above this level would trigger
more selling as some positions are overstretched.
Markets were also watching the central bank's monthly rate
meeting, although no surprises were expected with unchanged
rates at an all-time low of 3.5 percent. Bonds were quiet before
the decision due early afternoon local time.
The Polish economy is the only in central Europe to avoid
recession, and the better economic fundamentals have led
strategists to pick the zloty as an outperformer. []
Dealers said they still were bullish on the currency despite
weakness this month on the back of building concerns over the
country's rising debt and worries of a large corporate dividend
flooding the market in the upcoming weeks.
NEW BOND
The Czech crown <EURCZK=>, seen as a safer haven in the
region, was steady at 25.16 per euro. Local bonds were quiet
before the Finance Ministry's first auction of 6-year, floating
rate local bonds denominated in euros.
"We expect good demand both from international and domestic
investors, with spread about 80-90 bps over 6M Euribor, making
it a relatively interesting in comparison with the domestic FRN
2016, which trades only around 50 bps spread over 6M Pribor
currently," Komercni Banka dealers said in a note.
In Hungary, the forint <EURHUF=> was steady, shrugging off
better-than-expected current account data. []
Romania's leu <EURRON=> eased to 4.193, weighed down by
uncertainty over the future of the nine-month old governing
coalition, although dealers said the central bank has intervened
to add support over the past week. []
"I see the bank again on the selling side, the leu may thus
firm, but I do not expect major swings," said one dealer.
Romanian Prime Minister Emil Boc nominated an interim
interior minister from his centrist party on Tuesday,
heightening tensions within his fragile ruling coalition.
Governments in the region have battled with rising public
deficits, which analysts said will weigh on economic recovery in
the region, although agree the worst has passed.
On Tuesday, Moody's analysts told a Reuters investment
summit in Vienna that there is little chance of rises in eastern
European countries' debt ratings in the next few years given
recent fiscal expansion and worsening growth prospects.
* For more stories from the Reuters Central Europe Investment
Summit, please see [].
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.16 25.165 +0.02% +6.33%
Polish zloty <EURPLN=> 4.222 4.236 +0.33% -2.53%
Hungarian forint <EURHUF=> 270.16 270.25 +0.03% -2.45%
Croatian kuna <EURHRK=> 7.284 7.275 -0.12% +1.11%
Romanian leu <EURRON=> 4.193 4.212 +0.45% -4.26%
Serbian dinar <EURRSD=> 92.95 92.96 +0.01% -3.73%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -6 basis points to 156bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +181bps over bmk*
10-yr T-bond CZ10YT=RR -2 basis points to +178bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +381bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +331bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +294bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +544bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +503bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +447bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1125 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
Spot FX rates
Eastern Europe spot FX <EEFX=> Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=> Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Toby Chopra)
