* Romanian political stalemate cuts into debt sales
* BNP Paribas recommends long euro vs CZK
* FX weaken as cbanks are eyed in Poland, Czech Rep
(Updates prices, adds bonds)
By Gergely Szakacs and Jason Hovet
BUDAPEST/PRAGUE, Oct 26 (Reuters) - Romania rejected all
bids at a 1-year treasury bill sale on Monday, showing its
unwillingness to pay the high premium investors demand after a
government collapse earlier this month.
The political stalemate since has raised concerns over the
country's International Monetary Fund aid package, and paralyzed
the leu currency as markets fear central bank intervention.
The leu was steady on Monday at 4.29 to the euro and other
central European currencies eased from last week's gains, with
politics and the outlook for national budgets continuing to
weigh on investor sentiment.
Romania's finance ministry had planned to sell 1 billion
lei. It had cut a three-year bond sale last week after yields
climbed above 10 percent, the same amount set at a 1-year bill
tender a week ago. []
The ministry has postponed a planned Eurobond issue,
initially seen in October, due to political uncertainty.
"Yields rose because of the political situation and
uncertainty about the (implementation of the) IMF programme, but
the ministry has clearly signalled it will not accept yields
over 10 percent," one Bucharest-based trader said.
Romania's Prime Minister designate Lucian Croitoru unveiled
a cabinet line-up on Friday and parliament will decide a hearing
schedule this week for the proposed government members. But
analysts have given his cabinet little chance. []
LEFT OUT
Lower debt supply in the Czech Republic and Poland -- among
the region's best performing economies since the financial
crisis deepened last year -- has boosted demand at auctions in
the past month.
In Hungary, another country on IMF aid, yields have halved
in the last six months to around 7 percent thanks to an emerging
market rally and expectations of more cuts in interest rates.
Hungarian bond yields were up a touch on Monday, while the
forint <EURHUF=> led losses with a 0.5 percent drop to 267.95
per euro after touching its highest level this year last week.
"The forint tested the 265 level last week... but quickly
bounced back so that's quite a resistance level for any
firming," a Budapest dealer said.
"But if the global climate remains as positive as it is, I
wouldn't exclude the chance that we could firm all the way to
260 in the coming weeks."
Dealers said the region's currencies, besides the leu, would
continue to rise on any further weakness of the dollar.
Currencies have risen with the euro and global stock markets in
a rally in risk appetite stretching back to March.
The Polish zloty <EURPLN=>, which strategists have been most
bullish on, was steady at 4.18 to the euro. The central bank is
widely expected to leave interest rates stable on Wednesday.
The Czech crown <EURCZK=> fell 0.4 percent. BNP Paribas
recommended selling the crown against the euro on Monday on
expectations the central bank may try to talk the unit down more
ahead of a meeting next week. []
A call by central bank Governor Zdenek Tuma and
Vice-Governor Miroslav Singer to cut rates last month, though
outvoted by the bank's board, unnerved markets and knocked the
crown 2 percent this month.
The central bank meets again on Nov. 5 and analysts still
believe the bank's more than year-long easing cycle that brought
rates to a record low 1.25 percent was at an end. But rates on
1-year swaps have dropped a quarter point in October.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.991 25.883 -0.42% +2.93%
Polish zloty <EURPLN=> 4.18 4.173 -0.17% -1.56%
Hungarian forint <EURHUF=> 267.95 266.55 -0.52% -1.64%
Croatian kuna <EURHRK=> 7.215 7.215 0% +2.08%
Romanian leu <EURRON=> 4.286 4.287 +0.02% -6.34%
Serbian dinar <EURRSD=> 93.057 93.012 -0.05% -3.84%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -2 basis points to 83bps over bmk*
7-yr T-bond CZ7YT=RR +8 basis points to +90bps over bmk*
10-yr T-bond CZ10YT=RR 0 basis points to +81bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +5 basis points to +503bps over bmk*
5-yr T-bond HU5YT=RR +4 basis points to +436bps over bmk*
10-yr T-bond HU10YT=RR +3 basis points to +382bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1626 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, Writing by Gergely
Szakac/Jason Hovet; Editing by Patrick Graham)
