* Currencies track euro, markets watch euro/dollar
* Romania tenders T-bills, focus on yield cap
* Bond spreads narrow versus German bunds
(Adds bond prices, details)
By Jason Hovet
PRAGUE, Aug 9 (Reuters) - Higher stock markets lifted
central European currencies on Monday, with the Romanian leu
gaining ahead of a T-bill tender expected to attract significant
demand below a de facto yield cap imposed by the finance
ministry.
Markets were also waiting for further signals from the euro,
the region's main reference currency in recent sessions, which
has been rising against the dollar.
Romanian Central Bank Governor Mugur Isarescu said on Friday
the finance ministry should consider being more flexible towards
market yield demands in bond auctions, following a period of
scaling down issuance when it attracted few investors at below a
self-imposed 7 percent cap on returns. []
He also said he "discouraged" any strengthening of the leu.
The Romanian currency <EURRON=> added 0.3 percent on Monday,
bidding around a four-week high at 4.227 to the euro by 0739
GMT.
Bucharest was set to auction 6-month treasury bills in the
afternoon.
"Six-month T-bills are trading 6.8-6.9 percent, but volumes
are thin," a local trader said. "So I expect them to sell quite
a lot, if not all (the amount planned). It depends on how liquid
the market is."
The trader said a 1-year tender on Thursday would be a
tougher sell, with market yields on that maturity trading
between 7.2-7.3 percent.
STOCKS, EUR/USD LEAD
The Hungarian forint <EURHUF=> rose 0.3 percent and the
Polish zloty <EURPLN=> gained 0.2 percent.
The Czech crown <EURCZK=> edged up a touch after slipping
past the 24.8 resistance level late last week that dealers said
usually triggered euro selling orders.
Czech stocks <> also trailed the rest of the region,
holding flat despite Citigroup raising the country to neutral
from underweight in a new report. []
Budapest <> and Bucharest <> shares rose up to 1
percent.
Analysts and dealers said besides support from stocks,
currencies would track the euro/dollar cross. The euro's firming
in the past two months has given a boost to central European
units.
"We are looking for another good week for the euro-sensitive
EMEA currencies, CZK, HUF and PLN, as EUR/USD should continue to
move up," Danske Bank said in a note.
Polish bonds were stable on Monday, with markets mainly
taking a cue from the zloty due to a lack of local data.
Poland has met 73 percent of its 2010 borrowing needs, seen
around 196.8 billion zlotys, a finance ministry official told
state news agency PAP late on Friday. []
The finance ministry is offering up to 1.5 billion zlotys in
52-week treasury bills, with results expected at 1200 GMT.
Czech yields ticked down on longer-dated bonds, with the
benchmark 2019 bond <CZ1002471=> yield at new record lows around
3.58 percent and narrowing the spread with German bonds.
Czech consumer prices rose in July in line with
expectations, but didn't change the view of stable interest
rates into next year. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.796 24.811 +0.06% +6.14%
Polish zloty <EURPLN=> 3.984 3.99 +0.15% +3.01%
Hungarian forint <EURHUF=> 279.35 280.05 +0.25% -3.22%
Croatian kuna <EURHRK=> 7.219 7.217 -0.03% +1.25%
Romanian leu <EURRON=> 4.227 4.241 +0.33% +0.25%
Serbian dinar <EURRSD=> 105.45 105.67 +0.21% -9.08%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +6 basis points to 107bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +113bps over bmk*
10-yr T-bond CZ9YT=RR -6 basis points to +115bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +400bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +386bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +330bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1124 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 John Stonestreet)
