CEE MARKETS 2-Zloty, forint gain; rates debate in focus

                                
 * Polish, zloty firm more; global sentiment volatile
                                
 * Investors guessing on future monetary moves
                                
 
 (Adds fixed income, detail, quotes)
                                
 By Marius Zaharia
                                
 BUCHAREST, Aug 20 (Reuters) - The Hungarian forint and the
Polish zloty firmed on Thursday due to improved global sentiment
and investors digested clues over the next rate moves in the
region.
                                
 Hungary was closed for a two-day market holiday and expects
a 50 basis points rate cut to 8 percent on Monday as the central
bank tries to address a severe recession. [ID:nLAG003669]
                                
 However, the bank has a track record of surprising markets,
highlighted by its July move to cut rates by 100 basis points.
                                
 Polish central bank minutes showed the council was split 5-5
on June's 25 basis points rate cut, leaving governor Slawomir
Skrzypek with the casting vote [ID:nWAR010674]. Wednesday's weak
industrial data has reignited the debate about a new rate cut.
                                
 On Thursday, however, a finance ministry official said
Poland's industrial output may grow in August for the first time
since October [ID:nWAR010675].
                                
 In the Czech Republic, which has the region's lowest rates
at 1.25 percent, a central banker said macroeconomic conditions
would not allow a discussion on tightening monetary policy.
[ID:nPRG003576]
                                
 At 0917 GMT, the zloty <EURPLN=> was up 0.9 percent, the
forint <EURHUF=> was firmer by 0.7 percent, the Czech crown
<EURCZK=> was 0.2 percent stronger, while the Romanian leu
<EURRON=> was flat.
 "Summing up all the clues from global markets we have a
better risk sentiment today," one Bucharest dealer said.
                                
 "We are taking a break on data releases and (global mood) is
the main market driver now (in the region), at least until we
have a clearer picture on what will be the next policy moves."
                                
 The zloty and the forint have been the most volatile
currencies in the region since the start of the summer and the
units tend to gain more from global trends on the back of an
outperformance of the Polish economy and high yields in Hungary.
                                
 The crown is seen as rather stable in the short run due to
its status as a low-yielding funding currency.
                                
 
                                
 BONDS MIXT
                                
 Czech bond yields edged higher 5-8 basis points on the
longer end on Thursday in quiet trade, while Polish yields fell
as much as 3-5 basis points across the curve thanks to a better
mood on the global stocks.
                                
 "(There are) no more (Czech) auctions in August, weak supply
in September will keep the secondary market under demand
pressures," Komercni Banka traders said in a note.
                                
 Romania tenders 850 million lei ($285 million) in 3-year
t-bonds later in the day. Central European government have
successfully tapped domestic and international debt markets over
the summer, on the back of a general revival in risk taking.
                                
 "All in all, investors continue to show interest in local
issuances," UniCredit said in a note.
                                
 "The danger is that increased issuance by governments this
year and next will start to compete for funds with the private
sector, thereby pushing the recovery further out."
                                
 Widening budget gaps in the region are a major worry for
investors also because tighter fiscal policies will limit growth
when markets recover.
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>  25.577   25.639  +0.24%    +4.6%
Polish zloty     <EURPLN=>   4.142    4.17   +0.68%    -0.65%
Hungarian forint <EURHUF=> 270.78   273.1    +0.86%    -2.67%
Croatian kuna    <EURHRK=>   7.329    7.318  -0.15%    +0.49%
Romanian leu     <EURRON=>   4.225    4.222  -0.07%    -4.98%
Serbian dinar    <EURRSD=>  93.081   93.227  +0.16%    -3.87%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +1 basis points to  96bps over bmk*
4-yr T-bond   CZ4YT=RR    -5 basis points to  +144bps over bmk*
8-yr T-bond   CZ8YT=RR   +10 basis points to  +261bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -2 basis points to  +360bps over bmk*
5-yr T-bond   PL5YT=RR    -1 basis points to  +317bps over bmk*
10-yr T-bond PL10YT=RR    -6 basis points to  +281bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1217 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
                                
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 (Reporting by Reuters bureaux, writing by Marius Zaharia,
editing by Jon Boyle)