* Zloty rebounds but untouched by decision to keep rates
* Czech bond auction well bid
* Leu weakened by political tensions
(Adds Polish rate decision, Czech debt auction)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, Sept 30 (Reuters) - The Polish zloty
rebounded from early lows on Wednesday, helped by rising stocks,
but remained under pressure from concerns over mounting debt,
while shrugging off an expected decision to leave rates flat.
The Polish central bank left interest rates unchanged at a
record low of 3.5 percent on Wednesday, in line with
expectations and following 50 basis points cuts in Hungary and
Romania earlier this week [].
The decision did not move the currency or bonds.
"The market will now be waiting for the council's statement
to see whether there will be changes in the tone of the message
compared with the previous few months," said Piotr Kalisz, chief
economist at Citibank Handlowy.
The zloty <EURPLN=> was up 0.1 percent to bid at 4.232 to
the euro by 1142 GMT, but traded at its lowest since Sept 14 at
4.2475 early in the session, extending losses after a 1 percent
drop on Tuesday.
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.
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. []
Central European stocks jumped 1-2 percent, following
western peers up.
CZECH BONDS DEMAND HIGH
Czech bonds were little changed after a well-bid auction in
which the finance ministry sold 242 million euros of 6-year
floating rate bonds <CZ045351157=> in the first competitive
round of bidding. [].
The Czech crown <EURCZK=>, seen as a safer haven in the
region, was steady at 25.164 per euro.
Polish bonds also failed to react to government plans to
issue less debt in the fourth-quarter [] as
officials have teased the market before with this information.
In Hungary, the forint <EURHUF=> was 0.3 percent up, but
ignored better-than-expected current account data earlier in the
session. []
Romania's leu <EURRON=> fell to 4.207, 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. []
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=> 25.164 25.165 0% +6.31%
Polish zloty <EURPLN=> 4.232 4.236 +0.09% -2.76%
Hungarian forint <EURHUF=> 269.55 270.25 +0.26% -2.23%
Croatian kuna <EURHRK=> 7.281 7.278 -0.04% +1.15%
Romanian leu <EURRON=> 4.207 4.187 -0.48% -4.58%
Serbian dinar <EURRSD=> 92.96 92.92 -0.04% -3.74%
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 1442 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Marius Zaharia)
