* FX mixed as worries over Greece remain
* Polish bonds gain, analysts say correction over
(Adds fixed income, detail)
By Dagmara Leszkowicz
WARSAW, March 23 (Reuters) - Central European currencies
opened mixed on Tuesday, but uncertainty over EU financial
support for debt-stricken Greece weighed on the region and
threatened to weaken exchange rates in the short term.
Germany and its European Union partners clashed on Monday
over whether to provide a financial safety net for Greece, with
Chancellor Angela Merkel continuing to rebuff calls for an
agreement at an EU summit this week []
The dispute has put pressure on the euro, central Europe's
main reference currency.<EUR=>
"Certainly worries over a possible Greek bailout don't help
the region," said one Warsaw-based dealer. "And given the fact
that there are no local factors that can impact currencies right
now, it is still the key issue for the region."
By 1026 GMT the zloty <EURPLN> had edged down by 0.1
percent, while the forint <EURHUF=> and the Czech crown
<EURCZK=> were both slightly stronger against the euro.
Romania's leu <EURRON=> outperformed its peers, rising some
0.3 percent, its highest level since Feb. 2.
"The forint is approaching 265 per euro and the zloty is
near 3.90, both of which are technical barriers," one
Budapest-based dealer said. "We'll have to see what comes out of
Greece. That sets the tone, fundamentally."
The zloty and the forint shot to 15-month highs last week
while the crown jumped to a five-month peak on the region's
improving economic outlook and lower debt levels.
But comments by monetary policymakers who raised concerns
over their currencies' sharp rise and a worsening in overall
sentiment halted the gains. Some market players have predicted
range-bound trading in the coming days.
In the Czech Republic, analysts expect the central bank to
keep rates at their current record low at its next meeting on
Thursday. Although rates are seen rising later this year or in
early 2011, some see risk on the easing side.
Similarly, in Poland the market is pricing in two small rate
rises by the end of the year from an all-time low of 3.5 percent
but markets are uncertain about the timing of monetary
tightening.
The Polish central bank's governor, Slawomir Skrzypek, said
on Tuesday the strong zloty reduces inflationary risk, but
declined to comment on the currency's current level.
[]
Czech Prime Minister Jan Fischer said his country's economy
would grow only slightly this year, by a moderate 1.2-1.3
percent, while inflation could be about 2 percent.
[]
BONDS STRONGER
Polish bonds were slightly stronger on Tuesday and dealers
said recent falls were likely approaching an end.
"For now on, if nothing bad happens it should be the end of
the correction as there's no reason why Polish bonds should
weaken significantly further," said Remigiusz Zalewski, fixed
income dealer at BRE bank in Warsaw.
On Monday Poland set the final guidance for its 1.25 billion
euro issue of 7-year euro-denominated bonds at 100 basis points
over mid-swaps. []
So far this year Poland has issued debt worth 3 billion
euros and also 475 million in Swiss franc-denominated paper. The
finance ministry has said Poland had met 27 percent of its
borrowing needs for 2010 as of the end of February.
In Hungary, papers resumed their rally, mainly at the
long-end of the curve.
"One big (domestic) bank is buying in big amounts," a
Budapest-based fixed income trader said.
"The banking system still does not lend to the economy, the
banks have money, (government bond) supply remains thin and a
large (over 300 billion forint) bond expiry is ahead."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.409 25.432 +0.09% +3.58%
Polish zloty <EURPLN=> 3.899 3.894 -0.13% +5.26%
Hungarian forint <EURHUF=> 263.89 263.99 +0.04% +2.45%
Croatian kuna <EURHRK=> 7.259 7.26 +0.01% +0.69%
Romanian leu <EURRON=> 4.071 4.083 +0.29% +4.09%
Serbian dinar <EURRSD=> 99.47 99.577 +0.11% -3.61%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +3 basis points to 90bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +119bps over bmk*
10-yr T-bond CZ10YT=RR -3 basis points to +105bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +385bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +312bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +253bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -9 basis points to +479bps over bmk*
5-yr T-bond HU5YT=RR -12 basis points to +427bps over bmk*
10-yr T-bond HU10YT=RR -14 basis points to +399bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1126 CET.
Currency percent change calculated from the daily domestic
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(Reporting by Reuters bureaus, Writing by Dagmara
Leszkowicz; Editing by Susan Fenton)
