* Zloty, forint lead losses after stocks rally ends
* Hungary output falls sharply
* Czech govt agreement seen in doubt
* Hungary bonds firm on hope for demand from ECB
(Adds fixed income, details)
By Sandor Peto and Dagmara Leszkowicz
WARSAW/BUDAPEST, April 7 (Reuters) - Currencies in Central
Europe eased on Tuesday, reflecting a retreat of equity markets
in the world and the region and a firming of the U.S. dollar
against the euro <EUR=>.
Positions were slightly rearranged after a rebound of the
units in the past weeks and ahead of Easter's long weekend. The
Czech <> index led the losses of equity markets in the
region, shedding more than 3 percent.
The currencies are expected to continue to track changes in
risk appetite in global markets, while an almost 30 percent fall
in Hungary's industrial output in February was a reminder of
concerns over the state of the region's economies.[]
The central bank of Slovakia which entered the euro zone
this year forecast the country would suffer its first economic
contraction in 2009 as the global crisis hits export markets.
All Central European states expect recession now, except for
Poland and Bulgaria which see a sharp slowdown in growth.
Their currencies have posted deep losses since last summer
as reliance on exports and foreign financing have made them
vulnerable to the global crisis, and central banks have cut
rates to help the economies. The units rebounded in the past
weeks.
"We assume that the improved sentiment created by the (last
week's G20) summit is not just a temporary phenomenon even
though it is obvious that not all difficulties have been
overcome yet," Commerzbank analysts wrote in a morning note.
The region's most liquid unit, the Polish zloty <EURPLN=>
led Tuesday's losses, easing by 1.8 percent by 1407 GMT, to bid
at 4.498 against the euro.
Hungary's forint <EURHUF=> shed 1.1 percent to 296.64, while
the Czech crown<EURCZK=> eased by 0.4 percent to 26.63. Both
Hungary and the Czech Republic are trying to solve political
crises and replace their failed governments.
"If (Prime Minister designate Gordon) Bajnai is voted in by
Parliament next week, that could support the forint if the
global market sentiment, which is generally positive, remains
good," one dealer said.
The leader of the main Czech opposition Social Democrats,
Jiri Paroubek, said on Tuesday he saw no reason for the collapse
of a deal on an interim government that would lead the country
to early elections in the autumn, despite two smaller parties
backing away from the plan late on Monday.[]
DEBT MARKETS MIXED
Pressure on Czech bonds will remain due to growing supply
and worries that political horse-trading will undermine efforts
to cap spending, dealers said.
"The longer the (political) process, the more the budget
deficit outlook deteriorates," Komercni Banka dealers said in a
note. "Political consensus for more fiscal impulses now seem to
have very weak opposition, if any."
Polish government bonds moved sideways and dealers said the
direction would be set at Wednesday's primary tender of 1.0-1.5
billion zlotys worth of 10-year DS1019 bonds maturing in 2019,
where good demand is expected.
Hungarian bonds firmed, decoupling from the forint, partly
because European Central Bank Governing Council member Ewald
Nowotny told Reuters that the bank could discuss accepting
non-euro denominated bonds as collateral, one trader said.
[]
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.63 26.532 -0.37% +0.46%
Polish zloty <EURPLN=> 4.498 4.419 -1.76% -8.51%
Hungarian forint <EURHUF=> 296.64 293.54 -1.05% -11.15%
Croatian kuna <EURHRK=> 7.431 7.43 -0.01% -0.89%
Romanian leu <EURRON=> 4.165 4.156 -0.22% -3.62%
Serbian dinar <EURRSD=> 92.86 93.227 +0.4% -3.64%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +6 basis points to 218bps over bmk*
4-yr T-bond CZ4YT=RR -4 basis points to +243bps over bmk*
8-yr T-bond CZ8YT=RR +2 basis points to +305bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +399bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +353bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +303bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -19 basis points to +934bps over bmk*
5-yr T-bond HU5YT=RR -54 basis points to +873bps over bmk*
10-yr T-bond HU10YT=RR -47 basis points to +709bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1607 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/Sandor Peto; editing by Stephen Nisbet)
