* Czech currency breaks out of range after cbank minutes
* Polish PMI hits 46-month high, boosts zloty
* Polish bonds firm on CPI outlook
(Adds fixed income, quotes, details)
By Jason Hovet
PRAGUE, Oct 1 (Reuters) - The Czech crown hit a 22-month
high on Friday after minutes from last week's central bank
meeting indicated higher interest rates ahead, and other central
European currencies rose as data pointed to improved economic
prospects.
Poland's purchasing managers' index rose to its highest
level in nearly four years, pushing the zloty up around 0.7
percent against the euro. The Czech PMI rose to its highest
point since August 2007. [] []
The two economies are poised to grow faster this year and in
2011 than emerging European peers Hungary and Romania as well as
many euro zone states.
The zloty and crown have been the best performing central
European currencies in 2010, though they became stuck in tight
ranges around multi-month highs during September.
The crown <EURCZK=> broke through the key level of 24.5 per
euro in early trade on Friday, pushing it to its highest point
since mid-November 2008 at 24.375. It was up 0.8 percent on the
day at 24.371 by 0853 GMT.
"It was a reaction to the (Czech central bank) minutes...
showing there might be interest in raising rates in the next six
months," a Prague dealer said, adding that it was London buying
interest that started the move.
The Czech central bank left rates unchanged at a record low
0.75 percent last week but one member on the seven-seat board
voted for a rate hike, the first such move in more than two
years. The minutes showed a split on the board. []
4Cast analysts said a rate hike could come already this
year, noting the minutes said upside risks to inflation were
emerging as the recovery gathers pace and that low rates could
present a risk in the longer term to financial stability.
"This is a clear indication that the possibility for a rate
hike is nearing," 4Cast said.
Interest rate swaps were steady, though, on Friday, with the
2-year IRS <CZKAM6PR2Y=> unchanged at 1.80 percent, albeit 5
basis points higher than before last week's policy meeting.
POLISH BONDS FIRM
The zloty <EURPLN=> was up at 3.945 to the euro, while the
Hungarian forint <EURHUF=> rose around 0.3 percent. The Romanian
leu <EURRON=> was a touch up in a quiet market as investors wait
for Romania's top court rules on challenges filed by opposition
parties against a key IMF-backed pension reform bill.
The court, which is expected to rule on Oct. 6, has a
history of overturning reform packages.
In Poland, bond yields fell 1-4 basis points across the
curve after the Finance Ministry estimated consumer prices
probably rose 2.3 percent year-on-year in September, up from 2.0
percent in the previous month. []
Some dealers said the number was weaker than expected,
adding support to debt markets after the ministry also unveiled
on Thursday a fourth quarter debt supply lower than in the third
quarter.
"Inflation is not a threat, bond supply (for the fourth
quarter) is small and the central bank governor sounds neutral -
all those factors support Polish debt," said Krzysztof Izdebski,
fixed income dealer at PKO BP.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.371 24.569 +0.81% +7.99%
Polish zloty <EURPLN=> 3.945 3.972 +0.68% +4.03%
Hungarian forint <EURHUF=> 275.73 276.52 +0.29% -1.95%
Croatian kuna <EURHRK=> 7.303 7.305 +0.03% +0.08%
Romanian leu <EURRON=> 4.265 4.268 +0.07% -0.65%
Serbian dinar <EURRSD=> 106.17 106.47 +0.28% -9.69%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -3 basis points to 86bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +91bps over bmk*
10-yr T-bond CZ9YT=RR -4 basis points to +105bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +380bps over bmk*
5-yr T-bond PL5YT=RR -7 basis points to +343bps over bmk*
10-yr T-bond PL10YT=RR -4 basis points to +316bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1054 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, editing
by Tim Pearce, John Stonestreet)
