* Fx, stocks mostly rebound, Polish GDP positive surprise
* Hungarian bonds extend loss after Monday rate hike
* Hungary's 3-month bill yields jump 50 bps at auction
* Euro zone debt crisis key risk to markets
(Adds bonds, comment, prices)
By Sandor Peto
BUDAPEST, Nov 30 (Reuters) - Markets in the European Union's
eastern states were mostly firmer on Tuesday as Poland reported
stronger than expected growth in the third quarter of the year,
while investors consolidated after Monday's sharp falls.
But Hungary's auction of three-month debt fell short of its
target amount and yields rose after Monday's surprise central
bank (NBH) rate increase, and a conflict between the bank and
the government also weighed on the forint.
The euro zone debt crisis kept sentiment fragile in the
region and currencies are struggling to stay on the firmer side
of key technical levels, traders said.
Poland's gross domestic product (GDP) rose by 4.2 percent in
annual terms in the third quarter, more than analysts' 3.6
percent consensus forecast.
The zloty <EURPLN=> firmed after the figures, following
Monday's falls, strengthening 1.1 percent against the euro to
4.053 by 1058 GMT. Hungary's forint -- the other big loser in
the past days -- firmed 0.3 percent to 282.75 in volatile trade.
Romania's leu <EURRON=> firmed 0.4 percent to 4.284, while
the Czech crown <EURCZK=> eased 0.1 percent to 24.855.
Hungary's forint <EURHUF=D2> briefly reached the key 285
technical level against the euro before rebounding, even though
the government cut its three-month Treasury bill sale to 30
billion forints from 40 billion forints offered.
The NBH surprised on Monday by lifting its base rate by 25
basis points from a record low of 5.25 percent, the first
central bank in the region since the 2008 global crisis to
increase interest rates. []
Even though it indicated that further tightening may come, a
report that the government may press for a rise in the bank's
inflation target -- adding to plans to replace the majority of
rate setters next year -- added to concerns over Hungary's
policy path.
"Based on that, a weakening forint trend is on the cards,"
one Budapest-based currency dealer said.
"In the first round, 285 looks a technical support, then
288-290 from which the forint rebounded several times in the
past two years, while a move through 290 would be a significant
technical breakthrough," the dealer added.
An auction on Thursday of three, five and 10-year bonds
<HUISSUE> will be a key test of investor appetite after a recent
jump in yields, traders said. Yields on Hungary's 10-year debt
rose 11 basis points to 8.43 percent on Tuesday.
"At these levels the interest of foreign investors should
grow already, but this will fight with concern over the euro
zone at the auction and it's unclear which factor will be
stronger," one Budapest-based trader said.
CBANK TALKS UP ZLOTY
The region's stock markets rose, led by a rebound in
Budapest where the main equity index <> gained 2.2 percent.
The zloty -- investors' favourite Central European currency
in recent months due to strong Polish growth -- rebounded after
breaching technical levels at 4.0 and 4.1 in the past week.
"The (Q3 GDP) data is positive for the zloty, although it
will mitigate the unfavourable environment rather than turn the
trend around," said Rafal Benecki, analyst of ING Bank Slaski.
Central bank governor Marek Belka said the currency's
fluctuations were "not dramatic" and that it would return to its
appreciation trend after global market turbulence over Ireland's
fiscal woes ends. []
But dealers and analysts said concerns over the debt of
other euro zone members could maintain pressure on risk appetite
and assets in emerging markets -- including Poland despite
expectations for central bank rate hikes in Central Europe.
There are also worries that the Polish government has done
little other than rely on growth to bring down a budget deficit
set to reach almost 8 percent of GDP this year.
"Poland does not exactly stand out for its exemplary
national finances either... markets punish PLN additionally,"
Commerzbank said in a note on currency markets.
Dealers said the Czech crown could meet support around 24.95
to the euro after breaking the 24.890 level.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.849 24.819 -0.12% +5.91%
Polish zloty <EURPLN=> 4.071 4.096 +0.61% +0.81%
Hungarian forint <EURHUF=> 284.52 283.68 -0.3% -4.98%
Croatian kuna <EURHRK=> 7.432 7.43 -0.03% -1.65%
Romanian leu <EURRON=> 4.29 4.301 +0.26% -1.23%
Serbian dinar <EURRSD=> 107.12 107.09 -0.03% -10.49%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to 71bps over bmk*
7-yr T-bond CZ7YT=RR +8 basis points to +82bps over bmk*
10-yr T-bond CZ9YT=RR +5 basis points to +94bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +5 basis points to +689bps over bmk*
5-yr T-bond HU5YT=RR +19 basis points to +656bps over bmk*
10-yr T-bond HU10YT=RR +16 basis points to +562bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1010 GMT.
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(Reporting by Reuters bureaux, writing by Marton Dunai and
Sandor Peto; editing by Patrick Graham and Catherine Evans)
