* Polish Q4 GDP adds to better CEE econ outlook
* Zloty at 14-mth peak, forint hits 6-week high
* Czech 10-yr bond yield at two-month low
(Updates quotes, adds stocks, Romania eurobond)
By Marius Zaharia and Jason Hovet
BUCHAREST/PRAGUE, March 2 (Reuters) - The zloty hit fresh
14-month highs on Tuesday after data showed the Polish economy
grew faster than expected in the fourth quarter, adding to
signals recovery in central Europe is on track.
Surveys this week indicated that manufacturing activity will
expand in coming months, but analysts say rising unemployment
and shaky demand from Western Europe will make the recovery a
bumpy one.
Poland, the only European Union member to avoid recession
last year, saw gross domestic product grow by 3.1 percent on the
year in October-December with the help of higher exports and
inventory rebuilding. []
The data helped the zloty extend a near 5 percent gain this
year, the biggest rise among central European currencies. By
1457 GMT, the unit <EURPLN=> was up 0.3 percent to bid at 3.916
to the euro, just off an intraday trade high at 3.9088.
The Hungarian forint <EURHUF=> followed on the zloty's
heels, rising 0.5 percent to a six-week high, and Hungary's
stock market <> neared a one-month high. The Czech crown
<EURCZK=> was up 0.3 percent.
Warsaw <> led equity gains, jumping 2.3 percent.
"(The zloty) will continue to outperform this year because
it's enormously undervalued; it has a solid growth story; the
government is stable; there are lots of external revenues and a
plan in place to curb the budget problem," a London-based
foreign exchange strategist said.
Analysts expect economic recovery to be strongest in Poland,
which has a larger domestic market shielding it from problems
faced by more export-reliant countries like the Czech Republic.
A rise in exports this year is expected to fuel currency
gains and the region's currencies rallied on Monday after the
release of improving purchasing manager indices [].
EUROBONDS
Greece's fiscal woes have highlighted that central European
economies look in better shape financially than some euro zone
periphery economies.
This has pushed more investors to the region. Central
European currencies often track euro/dollar moves, but they
ignored the euro's slide to a 9-1/2 month low on Tuesday.
[]
Bonds extended gains, with three-year Hungarian bond yields
at three-year lows. The Czech 10-year bond <CZ10YT=RR> yield
fell to a two-month low, helped also by a tight second quarter
supply plan despite elevated borrowing this year.
[]
The Czechs are expected to take the load off domestic
borrowing with a euro-denominated bond soon. []
Romania named three managers on Tuesday to arrange a
eurobond. It came a day after the government increased its
domestic debt issuance plans for March versus last month,
raising doubts whether the announced eurobond would go ahead.
[].
The Romanian leu <EURRON=> was the only currency to miss out
on gains, bidding 0.2 percent weaker at 4.108 per euro.
"The 4.1 per euro level is a tough rock and it is blocking
further gains," one dealer said. "There is a fear in the market
that beyond this level the central bank will intervene as it
does not favour a stronger leu."
Moody's assigned a negative outlook to Romanian banks on
Monday, sending a warning signal to investors that unemployment
and bad debt could trouble the region this year.
Hungary's OTP Bank <OTPB.BU> would not give an outlook for
2010 on Tuesday because it said the cost of any negative swings
in the economy were too hard to predict. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.748 25.829 +0.31% +2.21%
Polish zloty <EURPLN=> 3.916 3.928 +0.31% +4.8%
Hungarian forint <EURHUF=> 266.3 267.7 +0.53% +1.52%
Croatian kuna <EURHRK=> 7.26 7.255 -0.07% +0.68%
Romanian leu <EURRON=> 4.104 4.099 -0.12% +3.25%
Serbian dinar <EURRSD=> 99.457 99.22 -0.24% -3.6%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -10 basis points to 86bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +124bps over bmk*
10-yr T-bond CZ10YT=RR -5 basis points to +101bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +397bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +329bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +288bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -8 basis points to +527bps over bmk*
5-yr T-bond HU5YT=RR -10 basis points to +467bps over bmk*
10-yr T-bond HU10YT=RR -5 basis points to +431bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1600 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Marius
Zaharia/Jason Hovet; editing by Stephen Nisbet/Ruth
Pitchford/Susan Fenton)
