* FX down on growing risk aversion, zloty leads losses
* Politics, fears over IMF aid, still weigh on leu
* Crown around 3-month low, bonds correct
(Adds fixed income, detail)
WARSAW, Oct 27 (Reuters) - Emerging Europe's currencies were
down on Tuesday, with the Polish zloty leading losses and the
Czech crown near a three-month low on the back of a sharp fall
in the euro/dollar and investors' pullback from risk.
Romania's leu <EURRON=> was stuck around 4.29 against the
euro as fears over the country's political turmoil were offset
by worries over central bank intervention on the FX market.
At 0942 GMT the zloty <EURPLN=> was 0.3 percent down versus
the euro at 4.20, while the Czech crown <EURCZK=> and Hungary's
forint <EURHUF=> were both 0.1 percent weaker.
The crown has lost 2 percent this month on the possibility
of a further rate cut, which was supported by Governor Zdenek
Tuma and Vice Governor Miroslav Singer last month.
Czech central banker Robert Holman said on Monday that
interest rates should stay flat until the global economy
recovers as more easing would have a limited impact on market
rates and could cause crown volatility. []
Czech bonds corrected more from recent gains on Tuesday,
with the 3-year <CZ3YT=RR> yield rising around 10 basis points.
"While we think that a 25 bps rate cut will be delivered
next Thursday, the profit-taking on the Czech bond market could
easily continue," CSOB said in a note.
Polish and Hungarian debt also lost on Tuesday with dealers
blaming global sentiment for the move.
Stocks in emerging Europe were also in the red, with
Prague's PX <> falling some 2 percent to drag on currencies
along with the fall in the euro and loss of risk appetite.
"Obviously the fall in EUR/USD left its marks on the CEE3
currencies," analysts at Commerzbank wrote in a note.
SUPPLY WEIGHS ON POLISH BONDS
Poland's finance ministry was due to publish its supply for
Thursday's bond switch tender and dealers said the ministry is
likely to offer longer-dated bonds.
"Despite the fact that most of fears are already priced in,
the supply may push bond prices even lower," said one
Warsaw-based dealer.
Markets there were also readying for the central bank rate
decision on Wednesday, but it is widely expected rates will stay
flat at an all-time low of 3.5 percent.
Polish government bonds have wobbled recently as markets
digested concerns over a rising general government deficit and
public debt, but demand has been lifted by lower supply.
In Romania, the finance ministry rejected all bids at a
treasury bill tender on Monday due to unacceptable yields.
Dealers said political uncertainty still weighed on the
Romanian market ahead of the International Monetary Fund (IMF)
mission review that starts on Wednesday and the presidential
election on November 22.
The country's parliament will hold hearings from Wednesday
to Friday for the cabinet proposed last week by Romania's
designated prime minister Lucian Croitoru, who has been given
slim chances of getting parliamentary backing.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.05 26.023 -0.1% +2.7%
Polish zloty <EURPLN=> 4.204 4.19 -0.33% -2.12%
Hungarian forint <EURHUF=> 268.73 268.35 -0.14% -1.93%
Croatian kuna <EURHRK=> 7.215 7.217 +0.03% +2.08%
Romanian leu <EURRON=> 4.286 4.285 -0.02% -6.34%
Serbian dinar <EURRSD=> 93.152 93 -0.16% -3.94%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +13 basis points to 97bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +94bps over bmk*
10-yr T-bond CZ10YT=RR +2 basis points to +84bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +6 basis points to +368bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +314bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +278bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +507bps over bmk*
5-yr T-bond HU5YT=RR +5 basis points to +455bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +396bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 0942 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;
editing by Stephen Nisbet)
