* Zloty off 13-month highs as Poland leaves rates unchanged
* Other FX also weaker, market awaits Bernanke's speech
* Czech bond yields drop after auction
* Region's debt not affected by worries over Greece
(Adds Polish rate decision, Czech bond auction)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, Feb 24 (Reuters) - The zloty traded off a
13-month peak on Wednesday as Poland's central bank left
interest rates unchanged as expected, with markets awaiting a
speech by the U.S. Federal Reserve chief later in the day.
Investors will keep close tabs on comments on policy later
on Wednesday at a Monetary Policy Council conference, following
the decision to keep rates flat at a record low of 3.5 percent,
particularly since nine of the panel's 10 members are new.
"The statements ... will help us judge their views on future
monetary policy, particularly since the MPC members have already
read the new inflation projection," said Maciej Reluga, chief
economist at Bank Zachodni WBK.
"The medium-term inflation path should determine the timing
of interest rate hikes. We still believe that the first hike
will take place in October."
The zloty and bonds were unchanged by the announcement, but
the currency <EURPLN=> was 0.1 percent weaker on the day, to
trade at 3.99 at 1310 GMT after firming below 3.95 per euro for
the first time since January 2009 earlier this week.
The forint <EURHUF=> and the Romanian leu <EURRON=> were
also down by a touch, while the Czech crown <EURCZK=> was 0.4
percent weaker.
"The sentiment is slightly more negative because of
yesterday's U.S. figures and the fall of equities," one dealer
in Budapest said.
Hungarian bonds were stable, while Czech bond yields dropped
helped by an auction of a new 5-year government bond, which was
almost three times oversubscribed. []
Czech bond yields have dropped this month, cutting in half a
rise at the start of the year, with prospects of a eurobond
issue helping local bond demand.
Finance Minister Eduard Janota reiterated on Wednesday he
may go ahead with a Eurobond issue in the first half of this
year but did not give any precise timing. []
Dealers said markets were looking to testimony by Federal
Reserve chief Ben Bernanke to Congress later on Wednesday for
fresh policy signals, following a surprise rise in its discount
rate last week that spooked investors. []
REGION IMMUNE
Concerns over how big EU countries will bail out Greece have
caused some jitters in Central European markets, but budget
prospects in the region are better than in some euro zone
members, analysts said.
Greece, a euro zone member, has pledged to slash its deficit
by 4 percentage points this year to 8.7 percent amid market
turbulence that has sent government bond yields up.
Czech Finance Minister Eduard Janota said on Wednesday
Greece would find it impossible to slash its budget deficit as
fast as promised. []
Central European currencies have held onto firming paths
seen this year during the market volatility as investors seek
safer investments in the region.
The region's bond markets also have not been affected by
worries over the heavily indebted euro zone periphery so far.
"This is actually our moment. The region as a whole is seen
as a safer place, among which Poland is shining," said Marek
Kaczor, fixed income dealer at PKO BP. "Currently Poland has
good publicity and the debt market is benefiting from it."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.865 25.755 -0.43% +1.75%
Polish zloty <EURPLN=> 3.99 3.988 -0.05% +2.86%
Hungarian forint <EURHUF=> 270.3 270 -0.11% +0.02%
Croatian kuna <EURHRK=> 7.267 7.282 +0.21% +0.58%
Romanian leu <EURRON=> 4.123 4.12 -0.07% +2.77%
Serbian dinar <EURRSD=> 99.39 99.18 -0.21% -3.53%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR 0 basis points to 88bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +127bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +107bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +395bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +332bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +290bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +539bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +492bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +450bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1510 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
Dagmara Leszkowicz; editing by Robin Pomeroy)
