* FX, bonds little changed; bourses down
* Czech 10-year bonds well bid
* Czech finmin expects deeper GDP contraction, crown unfazed
(Updates throughout)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, July 22 (Reuters) - Central European
currencies and bonds paused after a multi-day rally and stocks
fell on Wednesday, with a worsening growth outlook and nagging
Latvia worries somewhat offset by another well-bid debt tender.
Czech Republic drew the best bid for a sale of 10-year bonds
since the paper was launched in March, proving increased
interest for regional debt as shown by Poland and Hungary
earlier in the week.[].
The tender's results pushed Czech yields slightly lower at
the longer end of the curve, while other regional debt markets
stabilised after this week's rally.
But while financing conditions for the region improve, the
growth outlook continues to worsen. The Czech Finance Ministry
said the economy could sink by 4.3 percent this year, nearly
twice as much as earlier expected.[]
In Latvia, doubts persisted about the country's ability to
avoid currency devaluation after the Prime Minister said it
would be difficult to secure more European Union aid unless it
receives another cheque from the International Monetary Fund.
[].
At 1436 GMT, the Polish zloty <EURPLN=>, the Czech crown
<EURCZK=> and the Romanian leu <EURRON=> were little changed
from the previous close, while Hungary's forint <EURHUF=> was
0.35 percent weaker.
Bourses fell 1.5-2 percent across the region, after a rally
that has sent Warsaw's bourse <> to nine month highs.
"This is a correction after massive gains," one dealer in
Bucharest said. "There was some profit taking in currency
markets as well, but less driven as the (regional) financing
story continues to help."
In Poland, copper maker KGHM <KGHM.WA> fell 6 percent after
the treasury ministry said it wants to garner some $12 billion
from privatisation through end-2010, to plug a budget gap that
has pressured Polish markets in recent weeks.
Signals on future monetary policy moves in the region were
also mixed. A Czech central banker hinted on Tuesday that room
to debate further rate cuts has grown with signs that inflation
may remain below target. []
In Poland, a rate setter said interest rates might remain
unchanged until the current council completes its term in 2010,
dampening speculation of a further rate cut. []
FINANCING
The Polish finance ministry's debt department head Piotr
Marczak told Reuters that the country's recent dollar bond issue
has helped the country meet its full-year foreign financing and
created a safety cushion for its domestic needs.
But if market conditions are positive, the ministry may opt
to issue Swiss franc, yen or euro-denominated bonds in the
months ahead. []
Czech bond yields inched down after the 10-year bond tender.
Hungarian bond yields were little changed, while in Poland, only
the two-year papers gained slightly.
The stabilisation comes after a rally fuelled by strong
recent debt sales by Poland and Hungary, which showed appetite
for the region's debt is rising and offered hope Budapest could
wean itself off IMF aid. [] []
Hungary's state debt management agency AKK is expected to
set on Thursday the amount of the bonds to be offered next week.
"If they raise it by a large amount, that would certainly
signal self confidence to the market," a Budapest dealer said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.82 25.85 +0.12% +3.61%
Polish zloty <EURPLN=> 4.27 4.269 -0.02% -3.63%
Hungarian forint <EURHUF=> 272.89 271.65 -0.35% -3.42%
Croatian kuna <EURHRK=> 7.329 7.328 -0.01% +0.49%
Romanian leu <EURRON=> 4.234 4.231 -0.07% -5.19%
Serbian dinar <EURRSD=> 92.847 93.152 +0.33% -3.63%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +26 basis points to 156bps over bmk*
4-yr T-bond CZ4YT=RR -4 basis points to +173bps over bmk*
8-yr T-bond CZ8YT=RR -2 basis points to +295bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -11 basis points to +370bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +306bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +280bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -12 basis points to +710bps over bmk*
5-yr T-bond HU5YT=RR -14 basis points to +622bps over bmk*
10-yr T-bond HU10YT=RR -12 basis points to +512bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1636 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Dagmara Leszkowicz
and Marius Zaharia; Editing by Ruth Pitchford)
