* Stocks, bonds reverse gains, currencies retreat
* Ireland, euro zone eyed; Polish central bank meets on rates
* Romania allows yield to rise at T-bill auction
(Adds new comments, updates prices)
By Jason Hovet and Sandor Peto
PRAGUE/BUDAPEST, Nov 22 (Reuters) - Emerging European assets
gave up early gains on Monday as initial optimism over a likely
bailout to Ireland fizzled out, while Poland's central bank
(NBP) started a two-day rate-setting meeting.
Many analysts expect the NBP to lead a new tightening cycle
in the region, although recent policymaker comments have
moderated expectations that it might start to reverse two years
of monetary loosening as soon as this meeting.
Assets in the region rose across the board in early trade
after Ireland sought a bailout to help it through a banking and
budget crisis, but retreated later as the passing of Ireland's
2011 budget slid into doubt. []
News about the euro zone debt crisis often moves markets in
the emerging economies in Central Europe where tight export
links make the euro the key reference currency, and risk
appetite is a key liquidity and sentiment factor.
"Mainly the current prospects of the euro zone and the
resilience of the euro as a currency will set the direction,"
one Budapest-based currency dealer said.
"Currencies in the region are quite resilient (today) ...
but generally I'm not optimistic," the dealer added.
The region's currencies gave up early gains. At 1439 GMT the
forint <EURHUF=> and the leu <EURRON=> were still firmer by 0.1
percent against the euro from Friday, at 273.79 and 4.296,
respectively. The Polish zloty <EURPLN=> shed 0.1 percent to
3.941, while the Czech crown <EURCZK=> was flat 24.682.
Should the crown close weaker than 24.7, it will be prone to
further falls, one Prague-based dealer said. Traders in Budapest
said the next support for the forint was further away, at 278.
"But that has been a strong support," one dealer said.
The sentiment shift affected the region's stock markets
more. The main equity indices fell by 0.3-1.4 percent, with
Bucharest's <> taking the lead.
Government bonds also retreated. Hungarian bond yields rose
6-8 basis points -- with 5-year bonds trading at 7.23 percent,
near 11-week highs -- while their yield premiums over safer
German Bunds widened by 12-13 basis points.
Romania sold 1 billion leu worth of one-year Treasury bills
at a tender at an average yield of 7.22 percent -- a new
indication that the government is ditching a six-month-old
strategy of capping auction yields at 7 percent. []
CENTRAL BANKS EYED
In the region the Polish central bank's meeting is in the
focus of attention this week, and Hungary's central bank will
also discuss interest rates early next week.
Polish annual net inflation -- the last key economic figure
before the NBP's rate decision -- ran at 1.2 percent in October,
in line with expectations. []
The market has scaled back bets that the 10-strong Polish
Monetary Policy Council will kick off a tightening cycle this
month after comments from policymakers suggested there may not
be a majority to back a rate increase. []
But still almost half of analysts in a Reuters poll
projected a rate increase for the meeting which will end on
Tuesday.
The poll showed 10 of 18 analysts forecast no change in the
bank's main rate -- now at a record low of 3.5 percent -- while
the rest expected a 25 basis point rise. []
"FRA (forward rate agreements) seem still to be over-pricing
monetary tightening which could continue to weigh on the zloty
this week," RBC said on Monday.
"However, we would recommend selling EUR/PLN on any move
higher post the MPC meeting or buying PLN/HUF, which already
appears to contain some relative value."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.682 24.674 -0.03% +6.63%
Polish zloty <EURPLN=> 3.941 3.938 -0.08% +4.14%
Hungarian forint <EURHUF=> 273.79 273.97 +0.07% -1.26%
Croatian kuna <EURHRK=> 7.396 7.369 -0.37% -1.17%
Romanian leu <EURRON=> 4.296 4.299 +0.07% -1.36%
Serbian dinar <EURRSD=> 106.62 106.653 +0.03% -10.07%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +9 basis points to 57bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +76bps over bmk*
10-yr T-bond CZ9YT=RR +7 basis points to +90bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +13 basis points to +581bps over bmk*
5-yr T-bond HU5YT=RR +13 basis points to +546bps over bmk*
10-yr T-bond HU10YT=RR +12 basis points to +470bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1539 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
For related news and prices, click on the codes in brackets:
All emerging market news []
Spot FX rates
Eastern Europe spot FX <EEFX=> Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=> Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Hugh Lawson)
