* Chance of rate hike in Hungary recedes after wage data
* Polish markets in wait-and-see mode until rate move
* Forint up, crown gives back early gains
(Updates with afternoon price moves, adds quotes)
By Marius Zaharia
BUCHAREST/PRAGUE, Jan 18 (Reuters) - Hungary's currency and
bonds hit two-month highs on Tuesday as markets digested a more
positive outlook for spending cuts combined with a jobs report
pointing to low inflationary pressures.
The zloty and the Czech crown both gave back earlier gains
to trade slightly lower, with eyes in Poland fixed on a central
bank policy meeting concluding on Wednesday that most analysts
expect to lead to a hike of at least 25 basis points from the
record low of 3.5 percent rates have stood at since June 2009.
The forint hit its highest point since early November on the
strong side of 272 per euro, a key technical level, and stood
0.7 percent stronger in mid-afternoon at 272.2 <EURHUF=>.
"Last week's (comments by Hungarian Prime Minister Viktor
Orban) were positive, investors had been expecting confirmation
that there will be spending cuts and that helps sentiment," said
one Budapest-based trader.
"In the past months typically short positions were built in
the forint... there is a zloty/forint unwind now. Nevertheless,
this should not be called a bull forint story."
Yields in Hungary fell by up to 20 basis points to 8-week
lows along 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. []
The fixed income rally was helped by the forint's surge and
news that primary bond sales will be well below expiries in the
next few months. []
"There is a short-covering rally," one Budapest-based fixed
income trader said. "Also foreign investors expect (Hungary to
announce) something about (economic) reforms (around the end of
February)."
"Yields can go down to around 6.5 percent, particularly if
spending cuts are announced."
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 the first in the region to tighten monetary
policy following the financial crisis with 50 basis points of
increases to 5.75 percent. One trader said the wage data boosted
the camp expecting no hike at next week's meeting.
The Polish zloty opened firmer, then 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 said the time had come for Poland to start tightening
monetary policy, but the headlines still unnerved markets
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.
Deputy Finance Minister Dominik Radziwill said on Tuesday
Poland would 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.
[]
Romania's leu <EURRON=> was flat at 4.257 to the euro
<EURRON=>, while the Czech crown gave back early gains to the
strong side of 24.200 to trade 0.2 percent down at 24.322.
The crown has outperformed the forint and the zloty slightly
this year, gaining 2.8 percent to the highest levels since late
2008 versus 2.1 percent gains for the other two currencies,
helped by market confidence the centre-right government will
deliver on its promises of pension and welfare reforms.
"The crown tested the 24.200 per euro level in the morning,
but there was not any strong determination to stay below that,"
Raiffeisenbank trader Roman Fol said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.325 24.274 -0.21% +2.77%
Polish zloty <EURPLN=> 3.874 3.868 -0.15% +2.17%
Hungarian forint <EURHUF=> 272.35 274.16 +0.66% +2.07%
Croatian kuna <EURHRK=> 7.389 7.392 +0.04% -0.12%
Romanian leu <EURRON=> 4.254 4.257 +0.07% -0.49%
Serbian dinar <EURRSD=> 104.1 104.41 +0.3% +1.76%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +5 basis points to +60bps over bmk*
7-yr T-bond CZ7YT=RR -7 basis points to +78bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +88bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +382bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +352bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +328bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -2 basis points to +608bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +552bps over bmk*
10-yr T-bond HU10YT=RR +5 basis points to +481bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1628 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
(Reporting by Reuters bureaus, Writing by Jan Lopatka;
Editing by Patrick Graham, Ruth Pitchford, John Stonestreet)
