CEE MARKETS 3-Crown weakens after inflation data

                                
 * Crown down after surprisingly low inflation
                                
 * Polish 2-yr papers sell well but yields higher
                                
 * Czechs sell planned 6 bln in bonds despite lower demand
                                
 
 (Updates throughout)
                                
 By Marius Zaharia and Dagmara Leszkowicz
                                
 BUCHAREST/WARSAW, Feb 9 (Reuters) - Emerging European
currencies were mostly weaker on Wednesday, with the Czech crown
briefly touching a one-week low after weak inflation data
dampened expectations for a swift tightening of monetary policy.
                                
 Czech inflation came in at 1.7 percent in January, way below
a forecast of 2.3 percent and reducing the likelihood of an
interest rate rise soon. Expectations for a rate rise had
boosted the crown in recent weeks. [ID:nLDE7171KA]
                                
 "This is a dovish signal for monetary policy expectations
and bullish news for the CZK bond market," said Radomir Jac,
chief analyst at Generali PPF Asset Management.
                                
 At 1512 GMT, the crown <EURCZK=> traded 0.4 percent weaker
on the day at 24.172 per euro. The unit hit 27-month highs only
last week, partly on hopes of monetary tightening.
                                
 Weak inflation data also pushed down short-dated bond yields
by as much as 5 basis points.
                                
 Other currencies were also mostly in negative territory.
                                
 Hungary's forint continued to retreat from Monday's
nine-month highs after disappointing industry data from both
Hungary and central Europe's main trade partner, Germany, on
Tuesday. [ID:nLDE71715B]
                                
 "Those things obviously don't help the forint, and if you
take into account the strength of the dollar versus the euro
after yet another negative surprise, this time from Germany's
output figures, the slide makes more sense," a trader said.
                                
 The forint <EURHUF=> was 0.8 percent weaker against the euro.
The Polish zloty <EURPLN=> weakened 0.3 percent, a touch off
previous sharper losses, while the Romanian leu <EURRON=> edged
up 0.1 percent.
                                
 
                                
 BONDS DOWN
                                
 Polish bonds were a touch weaker on Wednesday, although
dealers said yields had not changed significantly on the
secondary market after the finance ministry sold a total of 5.25
billion zlotys of 2-year bonds maturing in 2013. [ID:nLDE7181EF]
                                
 "Yields are higher, but they are broadly at the same levels
as in morning trade," said one Warsaw-based dealer. "I guess
comments by a member of the Monetary Policy Council did not help
Polish debt and surely weakened the auction results."
                                
 Monetary Policy Council member Jerzy Hausner said in a
newspaper column that the central bank would continue to raise
borrowing costs to deal with imported inflation. [ID:nLDE7180A8]
                                
 Polish bond yields have risen some 15-25 basis points across
the curve since the start of 2011 on expectations of monetary
tightening.
                                
 The Polish central bank raised the key interest rate in
January by a moderate 25 basis points from an all-time low of
3.5 percent and is expected to deliver more rate increases this
year.
                                
 The Czechs successfully placed 6 billion crowns ($341
million) in bonds maturing in 2017 on Wednesday, but demand was
lower than expected. [ID:nLDE7180Z3]
                                
 Elsewhere, Hungarian bonds weakened a little with investors
eyeing moves on core markets and an auction due on Thursday.
                                
 "The auction will be a breeze tomorrow as there is a lot of
liquidity in the market from lots of expiries, and yields are
about 20-25 basis points above the levels seen at the last
auction," said one Budapest-based dealer.
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2011 
Czech crown      <EURCZK=>  24.172  24.078   -0.39%    +3.43%
Polish zloty     <EURPLN=>   3.89    3.878   -0.31%    +1.75%
Hungarian forint <EURHUF=> 270.14  268.32    -0.67%    +2.9%
Croatian kuna    <EURHRK=>   7.412   7.409   -0.04%    -0.43%
Romanian leu     <EURRON=>   4.253   4.258   +0.12%    -0.47%
Serbian dinar    <EURRSD=> 103.21  103.427   +0.21%    +2.63%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +5 basis points to  39bps over bmk*
7-yr T-bond   CZ7YT=RR    -1 basis points to  +73bps over bmk*
10-yr T-bond   CZ9YT=RR   +2 basis points to  +75bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +5 basis points to  +359bps over bmk*
5-yr T-bond   PL5YT=RR    0 basis points to  +332bps over bmk*
10-yr T-bond PL10YT=RR   +2 basis points to  +299bps over bmk*
The P
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    0 basis points to  +503bps over bmk*
5-yr T-bond   HU5YT=RR    -2 basis points to  +468bps over bmk*
10-yr T-bond   HU10YT=RR  -1 basis points to  +415bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1612 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
                                
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(Reporting by Reuters bureaus, writing by Marius Zaharia and
Dagmara Leszkowicz, editing by Stephen Nisbet and Susan Fenton)