* Romania cuts rates 25 bps as expected
* Polish PMI flat around 25-month high
* CEE markets fall as Greek woes hit sentiment
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By Jason Hovet and Gergely Szakacs
PRAGUE/BUDAPEST, May 4 (Reuters) - Central European assets
fell on Tuesday as market doubts about the effectiveness of an
aid package for Greece and a closer focus on high debt levels in
other states on the euro zone periphery curbed appetite for
risk.
Markets have greeted a record 110 billion euro bailout for
Greece with some reservation, and investors doubted it would
offer more than temporary relief. []
Concerns that Greece's struggles could spill over to other
euro zone peripherals have hung over emerging European Union
countries in the past weeks despite the region's lower debt load
and stronger growth outlook.
By 1301 GMT, most central European currencies were in the
red. Hungary's forint <EURHUF=>, which surrendered all of its
gains posted in 2010, led Tuesday's losses with a decline of one
percent to a three-month low against the euro.
"People's eyes are beginning to open up to the magnitude of
debts across Europe," said a currency dealer in Budapest.
Analysts said uncertainty over the incoming Hungarian
government's economic plans and its commitment to an IMF-led
financial support programme may have also played into the
forint's weak showing.
"It's a combination of euro weakness around doubts on
Greece's rescue, together with some country-idiosyncratic risks
around the new government and their commitment to their own IMF
programme on the fiscal deficit plan," said analyst Peter Attard
Montalto at Nomura. []
Stocks across the region also fell, with Warsaw <>
down 2.7 percent, Budapest <> shedding 2 percent, Prague
<> losing 0.9 percent and Bucharest <> plunging over 4
percent by 1312 GMT.
The heightened volatility has pushed central European
policymakers towards greater caution, with slowing monetary
easing in the case of Romania, and the Czech Republic delaying a
euro-denominated bond issue.
Earlier on Tuesday, Romania's central bank cut borrowing
costs by 25 basis points to a new record low of 6.25 percent, in
line with market expectations. []
The leu <EURRON=> was down 0.3 percent in afternoon trade,
with dealers saying subsequent comments from the bank that
tensions over the crisis in Greece may complicate an economic
recovery had no tangible market impact.
A large majority of analysts expect Greek worries to put
Czech rate setters in a wait-and-see mode at a Thursday policy
meeting. Markets, though, are split whether the central bank
will cut interest rates once more after recent dovish comments.
The Czech crown fell to two-month lows against the euro.
The zloty <EURPLN=> shed 0.6 percent, also falling to
two-month lows, after the country's manufacturing Purchasing
Managers' Index stabilised near a 25-month high, but indicated
the zloty's recent strength was starting to weigh on exports.
[]
Dealers said the next key levels for the zloty were at
3.9550-3.9600.
"If it weakens below those levels, we can even see the zloty
at around 4.0 to the euro."
Polish and Hungarian government bonds also retreated, with
yields rising up to 8 basis points in Poland and up to 25 basis
points in the Hungarian market.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.655 25.552 -0.4% +2.58%
Polish zloty <EURPLN=> 3.957 3.932 -0.63% +3.71%
Hungarian forint <EURHUF=> 273.15 270.3 -1.04% -1.03%
Croatian kuna <EURHRK=> 7.254 7.255 +0.01% +0.76%
Romanian leu <EURRON=> 4.14 4.128 -0.29% +2.35%
Serbian dinar <EURRSD=> 98.5 99.127 +0.64% -2.66%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +9 basis points to 103bps over bmk*
7-yr T-bond CZ7YT=RR +13 basis points to +86bps over bmk*
10-yr T-bond CZ10YT=RR +14 basis points to +112bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +18 basis points to +387bps over bmk*
5-yr T-bond PL5YT=RR +19 basis points to +331bps over bmk*
10-yr T-bond PL10YT=RR +19 basis points to +266bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +29 basis points to +470bps over bmk*
5-yr T-bond HU5YT=RR +31 basis points to +439bps over bmk*
10-yr T-bond HU10YT=RR +31 basis points to +389bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1501 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Gergely Szakacs, editing by Stephen Nisbet, John Stonestreet)
