* FX, stocks mixed, bonds weaker as fiscal concerns weigh
* Poland seen keeping rates flat in very tight vote
* Romanian govt seen surviving no-confidence vote
(Adds bonds, stocks, updates markets)
By Marton Dunai
BUDAPEST, Oct 27 (Reuters) - Emerging European currencies
were mixed on Wednesday and bonds weakened before a knife-edge
interest rate decision in Poland and a no-confidence vote on
Romania's government due later in the day.
The market is divided over how Poland's central bank will
react to recent strong data at its rate-setting meeting, with 8
analysts forecasting no change in rates and 7 projecting a 25
basis point hike, according to a Reuters poll. Its decision is
due at 1200 GMT. [] []
A run of strong Polish economic data, an unexpected jump in
inflation in September and some central bankers' calls for quick
monetary tightening from a record low of 3.5 percent are seen as
strengthening the chances that the Monetary Policy Council will
hike rates.
"We assign a one-third probability that the MPC acts,"
Goldman Sachs said in a note. "If the MPC decides to hike before
the year-end, we believe it would opt for a 50bp hike, rather
than signal a tightening cycle with a 25bp move."
Nordea projected in a morning note that a higher projected
inflation will tip the council towards a 25 basis point hike.
"Markets are not currently pricing in the hike and hence we
would expect higher market rates and a stronger PLN (zloty) in
case a hike is announced," Nordea said.
The zloty <EURPLN=> eased 0.2 percent by 0939 GMT. Hungary's
forint <EURHUF=> was 0.1 percent weaker, while the Czech crown
<EURCZK=> gained 0.2 percent.
In Hungary, the forint remains under pressure as the IMF's
criticism's of the country's fiscal stance on Monday are still
weighing on the market, a dealer said.
Czech dealers said a close above the 24.65 per euro
resistance level left the crown vulnerable to further losses.
Romania's leu <EURRON=> dipped 0.2 percent and pressure on
the currency was expected to continue as the government's slim
majority put its ambitious reform agenda on a shaky footing.
The centrist government looks likely to survive a
no-confidence vote in parliament due after 1000 GMT over its
deep spending cuts and tax hike, which are needed to maintain a
20 billion euro IMF-led bailout. []
"(The government's) survival is already priced in so the leu
wouldn't go any further than 4.25-4.26," one Bucharest dealer
said. "Otherwise, it will go towards 4.35-4.4."
Dealers expect the central bank to intervene to stem any
weakening pressures from a government collapse, but the leu
could still flirt with all-time lows in such a scenario.
FISCAL CONCERNS WEIGH ON BONDS
Government bonds weakened around the region, with Hungary's
yields leading the way, rising as much as 15 basis points on the
short end of the curve, after the government's latest fiscal
measures stirred markets.
Investors were also concerned by the ruling Fidesz party's
move on Tuesday to prevent the Constitutional Court from ruling
on changes in the pension system and other budgetary issues.
[]
"The selling pressure was pretty tough early on, but volumes
were low," a dealer said. "We're awaiting more news, especially
on Polish rates, which could affect us through a forex proxy."
Czech bond yields were also up, with the benchmark 10-year
yield at an 11-week high and continuing a gradual climb seen
since September when the Finance Ministry rounded out much of
2010 borrowing.
The government in Prague asked parliament on Tuesday to
quickly push through fiscal austerity laws under a "legislative
emergency" stipulation. []
The ruling coalition lost its Senate majority this month to
the opposition, who can now delay -- but not stop -- key budget
savings bills, threatening the 2011 budget that assumes the laws
will be in effect from the start of the year.
Poland's yields inched higher as well and dealers said they
expected a further increase until the rate decision.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.603 24.646 +0.17% +6.97%
Polish zloty <EURPLN=> 3.94 3.933 -0.18% +4.16%
Hungarian forint <EURHUF=> 275.07 274.93 -0.05% -1.72%
Croatian kuna <EURHRK=> 7.339 7.34 +0.01% -0.41%
Romanian leu <EURRON=> 4.28 4.271 -0.21% -1%
Serbian dinar <EURRSD=> 107.1 106.93 -0.16% -10.48%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to +60bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +75bps over bmk*
10-yr T-bond CZ9YT=RR -9 basis points to +83bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +372bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +350bps over bmk*
10-yr T-bond PL10YT=RR -5 basis points to +310bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +12 basis points to +548bps over bmk*
5-yr T-bond HU5YT=RR +6 basis points to +524bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +461bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1139 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Marton Dunai; editing by Stephen Nisbet)
