* Polish, zloty firm more; global sentiment volatile
* Investors guessing on future monetary moves
* Romania sells less than planned in bond sale
(Updates throughout)
By Marius Zaharia and Jason Hovet
BUCHAREST/PRAGUE, Aug 20 (Reuters) - A rebound in global
equities helped boost the Hungarian forint and the Polish zloty
on Thursday, while expectations that Poland's central bank was
done with policy easing ended a rally in bond prices.
Hungary was closed for a two-day market holiday and expects
a 50 basis point rate cut to 8 percent on Monday as the central
bank tries to ease a severe recession. []
However, the bank has a track record of surprising markets,
highlighted by its July move to cut rates by 100 basis points.
Poland's central bank decided to leave interest rates flat
at an all-time low of 3.5 percent at its July meeting due to
concerns over inflaton and uncertainty over domestic and global
growth, minutes released on Thursday showed. []
But a finance ministry official said on Thursday that the
country's industrial output may grow in August for the first
time since October, thanks to a rebound in exports. The central
bank is set to make its next interest rate decision on Aug 26.
The zloty <EURPLN=> bid 0.4 percent up from Wednesday's
local close at 4.155 to the euro, off earlier highs. Bond prices
were little changed, although dealers expected a weaker tone in
the run up to the central bank's policy meeting.
"It's possible bonds will weaken (next week). There seems to
be no driving force that could push bond prices up as inflation
remains worryingly high," a fixed income trader said.
In the Czech Republic, which has the region's lowest rates
at 1.25 percent, a central banker said macroeconomic conditions
do not allow discussion on tighter policy. []
At 0917 GMT, the forint <EURHUF=> was firmer by 0.6 percent,
the Czech crown <EURCZK=> was 0.2 percent stronger, while the
Romanian leu <EURRON=> was off 0.3 percent at 4.233, near a
month low it hit on Monday.
Stocks in the region rose, led by 3 percent gains in Warsaw
<> <>.
"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,"
one Bucharest currency dealer said.
ROMANIA BOND SALE
The zloty and the forint have been the most volatile
currencies in the region in recent weeks and the units have
gained because of Poland's outperformance of the global economy
and high yields in Hungary.
The crown is considered more stable in the short run due to
its status as a low-yielding funding currency.
Romania sold 302 million lei ($101.7 million) in 3-year
bonds on Thursday, with the average yield falling to 10.24
percent. The ministry had planned to sell 850 million lei.
Yields have fallen from as much as 14 percent at the start
of the year, and analysts see them falling below 10 percent by
the end of the year, reflecting easier central bank policy.
Falling rates over the past few months have boosted debt
markets.
"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."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.598 25.639 +0.16% +4.51%
Polish zloty <EURPLN=> 4.155 4.17 +0.36% -0.96%
Hungarian forint <EURHUF=> 271.6 273.1 +0.55% -2.96%
Croatian kuna <EURHRK=> 7.335 7.318 -0.23% +0.41%
Romanian leu <EURRON=> 4.233 4.222 -0.26% -5.16%
Serbian dinar <EURRSD=> 93.077 93.227 +0.16% -3.86%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +3 basis points to 98bps over bmk*
4-yr T-bond CZ4YT=RR -6 basis points to +142bps over bmk*
8-yr T-bond CZ8YT=RR +11 basis points to +262bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +6 basis points to +365bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +320bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +283bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1622 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaux, writing by Marius Zaharia,
editing by Jon Boyle and Lin Noueihed)
