* Currencies retrench after Bernanke's comments
* Czech bond yields drop after auction
* Region's debt not affected by worries over Greece
(Adds Poland's comments on policy, EMU poll)
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, while Czech bond yields
dropped following a successful auction.
Poland left its key interest rate on hold at a record low of
3.5 percent on Wednesday, keeping its policy bias neutral, as
the central bank said it saw equal chances for inflation to be
above or below target in the medium term.
Central bank Governor Slawomir Skrzypek said economic
fundamentals suggested the zloty <EURPLN=> should remain stable
[].
The currency showed little reaction on the comments, and at
1605 GMT was 0.3 percent stronger compared with Tuesday's close,
off 13-months highs of above 3.95 per euro hit earlier this
week.
The forint <EURHUF=> and the Romanian leu <EURRON=> erased
intra-day losses to trade flat on the day, while the Czech crown
<EURCZK=> remained half a percent weaker.
Traders said markets were focused mainly on poor U.S. home
sales data [] and Federal Reserve chief Ben
Bernanke's pledge to keep interest rates low. []
"(The region) weakened further due to poor U.S. data at
first, but came back after Bernanke's comments, because low
interest rates in the U.S. should be taken as a positive by
investors in the region," one dealer in Bucharest said.
Investors have previously feared the world's biggest economy
could signal a tightening in liquidity conditions, which would
limit resources for investment in emerging markets.
Czech bond yields dropped, helped by an auction of a new
5-year government bond that 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 precise timing. []
Hungarian and Polish bonds were stable.
EFFECTS OF GREECE'S PROBLEMS
Concerns over how big EU countries will bail out Greece have
caused some jitters in Central European markets, but fiscal
prospects in the region are better than for some euro zone
members, analysts said.
Euro zone member Greece 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 cut the deficit that fast.
[]
Central European currencies have held onto firming paths
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.
However, Greece's debt crisis has cast a doubt over the
euro's further enlargement, likely pushing back adoption of the
single currency for the biggest emerging European economies by
at least a year, a Reuters poll showed [].
The region's biggest economy, Poland, is seen entering the
euro zone in 2015, a year later than expected in a previous
survey. The view was shared also by its finance minister Ludwik
Kotecki [].
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.873 25.755 -0.46% +1.72%
Polish zloty <EURPLN=> 3.978 3.988 +0.25% +3.17%
Hungarian forint <EURHUF=> 270.08 270 -0.03% +0.1%
Croatian kuna <EURHRK=> 7.269 7.282 +0.18% +0.55%
Romanian leu <EURRON=> 4.12 4.12 0% +2.85%
Serbian dinar <EURRSD=> 99.277 99.18 -0.1% -3.42%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +1 basis points to 89bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +128bps 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 +6 basis points to +399bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +333bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +290bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +540bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +493bps 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 1805 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/Dagmara
Leszkowicz/Marius Zaharia; editing by John Stonestreet)
