* Chances for a rate hike in Hungary lower after wage data
* Markets likely in wait-and-see mode until Polish rate move
(Updates with Hungary bond moves, quote)
By Marius Zaharia
BUCHAREST, Jan 18 (Reuters) - Hungarian bond yields hit
8-week lows on Tuesday as wage data lowered the chances of a
rate hike next week, while investors in Poland eyed a two-day
central bank meeting that is expected to raise borrowing costs.
Yields in Hungary fell by up to 25 basis points across the
curve after data showed average wages dropped by 1.2 percent on
the year in November, compared with a consensus for a 2 percent
increase. []
"There has been buying interest from abroad," one
Budapest-based fixed income trader said.
"After the wage figures in the morning, more people think
than earlier that the central bank will keep interest rates on
hold next week (rather than raising them further)."
Rate-setter Judit Nemenyi, who backed the bank's rate rises
in November and December, told Reuters on Monday she was
inclined towards further tightening but November wage data would
weigh on her decision at the Jan. 24 meeting. []
The bank was first in the region to tighten monetary policy
with 50 basis points of increases to 5.75 percent. Poland may
follow on Wednesday, when it is expected to deliver a 25 basis
points hike from a record low of 3.5 percent.
The Polish zloty weakened briefly in early trade on comments
by Governor Marek Belka published on Tuesday, but made on Dec.
28, that interest rate hikes were only needed if price growth
proved long-lasting. []
That was a week before an interview with Reuters in which
Belka announced the time had come for Poland to start tightening
monetary policy, but the headlines still unnerved markets now
betting firmly on a rise in rates. []
"Have you seen how fast euro/zloty moved 100 pips higher on
that? It will be a regional slaughter if they don't hike," one
dealer in Bucharest said.
Money market forward rates <PLNFRA> price in at least a 25
basis point rise.
The Dec. 28 comments' publication prevented the zloty from
tracking gains in the euro/dollar. At 1039 GMT, the unit was
virtually flat against the euro, while the Hungarian forint --
the other currency in the region that is very sensitive to
global risk appetite -- was up 0.7 percent to a one-month high
of 272.29.
Romania's leu <EURRON=> was flat, while the Czech crown
<EURCZK=>, which has outperformed this year, was up 0.2 percent.
CZECHS GO THE OTHER WAY
Analysts remained bullish on the Czech Republic, where Prime
Minister Petr Necas said he backed a proposal to merge the
country's two value-added tax rates at 19 percent -- raising the
overall take -- to finance a pension reform. []
The government plans to divert a portion of contributions to
the state pay-as-you-go system to private pension funds, the
opposite of what Hungary did last year, when it sparked fears of
lower demand for state debt.
One dealer in Prague said the crown's next technical level
was around 23.700 per euro from Tuesday's 24.23, so the room was
open for further firming but at the same time there may be a
correction in the short term after recent gains.
Poland said late last year it would overhaul its pension
system by shifting some employee contributions away from the
private sector, a move which together with expectations for
higher rates pushed debt yields ever higher in January.
On Tuesday, deputy Finance Minister Dominik Radziwill said
Poland will probably issue yen and Swiss franc denominated bonds
in the first half of this year after the country floated 1
billion euros in 10-year euro denominated bonds last week.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.229 24.274 +0.19% +3.18%
Polish zloty <EURPLN=> 3.866 3.868 +0.05% +2.38%
Hungarian forint <EURHUF=> 272.36 274.16 +0.66% +2.06%
Croatian kuna <EURHRK=> 7.39 7.394 +0.05% -0.14%
Romanian leu <EURRON=> 4.255 4.257 +0.05% -0.52%
Serbian dinar <EURRSD=> 104.27 104.41 +0.13% +1.59%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +8 basis points to 63bps over bmk*
7-yr T-bond CZ7YT=RR -6 basis points to +79bps over bmk*
10-yr T-bond CZ9YT=RR -5 basis points to +87bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -21 basis points to +582bps over bmk*
5-yr T-bond HU5YT=RR -31 basis points to +523bps over bmk*
10-yr T-bond HU10YT=RR -25 basis points to +451bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1239 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;
Editing by Patrick Graham/Ruth Pitchford)
