* Zloty down, cbanker says MPC targeting FX stability
* Polish CPI supports low interest rates
* Yields fall further at Romanian, Polish debt tenders
(Adds debt tenders, MPC, IMF comments on zloty)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, March 15 (Reuters) - The Polish zloty
underperformed on Monday after rallying to 15-months peaks last
week, as inflation data and comments from central bankers and
the IMF supported low interest rates.
The zloty has led a jump in emerging European currencies
this year as investors favour the region's assets due to better
growth prospects than some western peers and worries about the
debt burdens of countries on the euro zone periphery.
This kind of positioning has also led to a sharp fall in
yields across the region, especially in Romania which lagged
last year due to a political crisis and it is now catching up as
a deal with the International Monetary Fund has resumed.
Credit default swaps (CDS) have also dropped to 1-1/2 year
lows in Hungary and Poland this month, with investors asking for
lower risk premiums in the region, according to Reuters data.
Yields at one-year T-bill tenders in Romania and Poland have
fallen further []. In Romania, yields dropped more,
as interest rates there are expected to fall about one
percentage point this year, while Polish markets price in hikes.
"Romania is seen as an opportunity in a regional context,
since it has been avoided until this year ... and rates are
expected to fall," said Nicolaie Alexandru-Chidesciuc, chief
economist at ING Bank in Bucharest.
"However, it is an overreaction, the pace is too fast and it
is possible that the inflation trend may not justify such yield
levels and the time for a correction may not be far away."
In Poland, where markets are pricing in one or two rate
hikes in the second half of the year, February inflation data
came below expectations and strengthened opposite views that the
central bank will not hike rates any time soon [].
Some economists are reversing rate hike bets, arguing the
the zloty's gains in recent weeks could hurt recovery prospects.
[].
Their view was supported by comments from The International
Monetary Fund, which urged Poland on Monday not to raise
interest rates any time soon, saying economic recovery is
uncertain. []
ZLOTY STABILISING
Polish central bank Governor Slawomir Skrzypek said on
Saturday the zloty is beginning to stabilise, following up
comments last week that the fundamentals did not justify the
state of currency markets. []
Another central banker, Elzbieta Chojna-Duch, said on Monday
the Monetary Policy Council was also targeting zloty stability
and dismissed talks about monetary tightening [].
The zloty <EURPLN=> eased 0.3 percent to bid at 3.893 to the
euro by 1429 GMT, around 1 percent off its high last week. But
analysts said it could again test stronger levels if the global
mood remains upbeat.
The zloty is up 5.4 percent since Jan. 1, while the Czech
crown and Romanian leu have kept pace with 3.4 percent and 3.8
percent rises, respectively.
On Monday, the crown <EURCZK=> edged up 0.1 percent to 25.46
per euro and the leu <EURRON=> dipped to 4.086. The Hungarian
forint <EURHUF=> was 0.4 percent higher with domestic markets
closed for a holiday.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.46 25.475 +0.06% +3.37%
Polish zloty <EURPLN=> 3.893 3.883 -0.26% +5.42%
Hungarian forint <EURHUF=> 264.44 265.49 +0.4% +2.23%
Croatian kuna <EURHRK=> 7.263 7.261 -0.03% +0.64%
Romanian leu <EURRON=> 4.086 4.082 -0.1% +3.71%
Serbian dinar <EURRSD=> 99.759 99.72 -0.04% -3.89%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +7 basis points to 83bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +117bps over bmk*
10-yr T-bond CZ10YT=RR +2 basis points to +103bps 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 0 basis points to +310bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +262bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1629 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; Editing by Susan Fenton)
