CEE MARKETS 3-Crown down ahead of c.bank,Polish bonds up

                                
 * Czech crown retreats before cbank on Thursday
                                
 * Long zloty/crown trades in favour
                                
 * Polish bonds strengthen on a succesful 2-yr bonds auction
                                
 
 (Adds fresh quote, prices)
                                
 By Jason Hovet and Dagmara Leszkowicz
                                
 PRAGUE/WARSAW, Aug 5 (Reuters) - The Czech crown retreated
to a 3-week low on Wednesday before a central bank meeting this
week that has markets split on whether rates will be cut, while
Polish bonds strengthened after a successful auction showing 
healthy demand.
                                
 Investors squared positions on the crown <EURCZK=> before
Thursday's bank meeting, causing it to slip 0.4 percent as
markets remain divided on whether policymakers will continue to
ease rates or stay on hold for now.
                                
 "Investors were buying zlotys for the crown and additionally
the Czech currency weakened to Romania's leu," said Jakub
Wiraszka, dealer at BRE bank in Warsaw.
                                
 "Clearly there's an interest in the Polish currency and the
unit is likely to remain a leader among other regions'
currencies further."
                                
 In Romania, the leu <EURRON=> was down 4.4 percent on
Wednesday following a half-point interest rate cut on Tuesday.
                                
 The zloty <EURPLN=> was 0.1 percent down against the euro
but stuck around its highest levels since January, while the
Hungarian forint <EURHUF=> dipped 0.6 percent.
                                
 The zloty has suffered the biggest drop in the past year
with a 21 percent fall, but also gained the most in a risk rally
last month as analysts say Poland is best positioned for a
return to moderate economic growth.
                                
 Investors have booked currency profits this week after 2-4
percent gains for the zloty and forint since mid-July during a
risk rally from signs off the start of a global recovery.
                                
 Central Europe's economies have shown their first hints of a
bottom, with strong retail sales appearing in Poland and the
Czech industrial contraction slowing in June.
                                
 
                                
 BONDS UP
                                
 Poland's finance ministry sold all 2-year bonds on offer at
primary and supplementary tenders on Wednesday with unexpectedly
high demand that dealers said pushed yields down by 3 basis
points.
                                
 Later in the day the country's finance ministry's official
said further bonds supply may be limited as the budget situation
is good and the ministry has not much debt to buy
back.[ID:nL5268030]
                                
 At the same time Hungary's bond yields fell 10-15 points
despite the forint's retreat.
                                
 "The weaker forint might lift the bids slightly, but the
sentiment is positive," one Budapest-based trader said. "In the
morning a domestic bank bought heavily and pushed yields down."
                                
 He also said the country's bond yields may be pushed even
lower as there would be a big expiry of bonds next week and this
might create demand for a short-term bonds.
 ----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>   25.948    25.838   -0.42%   +3.1%
Polish zloty     <EURPLN=>   4.109    4.105     -0.1%    +0.15%
Hungarian forint <EURHUF=>   267.8    266.31    -0.56%   -1.59%
Croatian kuna    <EURHRK=>   7.337    7.339     +0.03%   +0.38%
Romanian leu     <EURRON=>   4.2      4.2        0%      -4.42%
Serbian dinar    <EURRSD=>   93.14    92.817    -0.35%   -3.93%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +6 basis points to  131bps over bmk*
4-yr T-bond   CZ4YT=RR    -27 basis points to  +138bps over bmk*
8-yr T-bond   CZ8YT=RR    -6 basis points to  +262bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -10 basis points to  +344bps over bmk*
5-yr T-bond   PL5YT=RR    -6 basis points to  +279bps over bmk*
10-yr T-bond PL10YT=RR    -5 basis points to  +261bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -31 basis points to  +648bps over bmk*
5-yr T-bond   HU5YT=RR    -64 basis points to  +587bps over bmk*
10-yr T-bond   HU10YT=RR  -51 basis points to  +512bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1540 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
Dagmara Leszkowicz)