* FX weaker as investors take breather after recent gains
* Serbia's dinar hits record low vs euro, cbank intervenes
* IMF to set no new aid condition to Romania - minister
* Bonds steady, Hungary raises 3-month bill sale
(Recasts throughout)
By Dagmara Leszkowicz and Marton Dunai
WARSAW/BUDAPEST, Aug 3 (Reuters) - East European currencies
eased on Tuesday on a slight stock market correction and some
short covering, and record lows of the Serbian dinar versus the
euro triggered intervention by its central bank.
Serbia's central bank sold euros to defend the dinar as it
hit an all-time low with bids at 107 per euro <EURRSD=>, dealers
said. The dinar has lost nearly 10 percent so far this year, on
top of a 30 percent drop last year. []
"Without central bank intervention, the dinar will not
gain," one dealer said.
Trading was illiquid in most markets, and investors remained
bullish on the outlook for the region. The Czech crown was still
trading close to 20-month highs and the Polish zloty near
11-week-highs.
The Hungarian forint, a regional underperformer, was also
seen steady after slipping off the two-week highs it had reached
on Monday. The upside was limited though, dealers said.
"(The forint) had firmed too much," one Budapest-based
dealer said. "Considering the domestic uncertainties, it would
make no sense for it to go beyond 280."
European stocks drifted lower, signalling a halt in a rally
spurred by stronger company results and improved economic data.
Stocks in the region were mixed, with Budapest's BUX <>
flat, the Warsaw WIG20 <> off 0.1 percent and Prague's PX
<> down 0.3 percent at 1313 GMT.
By 1305 GMT the zloty <EURPLN=> and the crown <EURCZK=> had
slipped 0.3 percent against the euro from Monday's close, while
the forint <EURHUF=> was 0.2 percent lower.
Romania's leu <EURRON=> was trading 0.1 percent higher after
a government minister said the International Monetary Fund,
which is in Bucharest for a review of its aid deal, would not
set new conditions. []
The IMF's review is expected to end on Wednesday and dealers
said the market had already priced in the likely disbursement of
a 900 million euro aid tranche.
Romania's central bank also decides on interest rates on
Wednesday. It is expected to keep rates flat at 6.25 percent,
according to a Reuters poll. []
RATES FLAT ALL AROUND
The Czech central bank is expected to keep rates on hold on
Thursday, with dealers saying the crown <EURCZK=> may ease
further to around 25 per euro.
In Poland, a rate setter said that a government plan to
raise VAT would boost inflation, but not necessarily lead to a
rise in interest rates. []
The Polish central bank has kept its benchmark rate at an
all-time low of 3.5 percent since June 2009 but it is expected
to raise borrowing costs by 25 basis points later in the year.
In Hungary, the central bank had warned of possible rate
hikes if there was a sustained rise in risk premia after talks
between the government and the IMF/EU collapsed last month.
Despite the uncertainty over Hungary's fiscal plans for next
year and its relations with lenders, the country raised a bill
auction on Tuesday. The debt management agency sold 50 billion
forints ($229.3 million) worth of bills, higher than the
originally planned amount. []
The Polish government was seen approving a plan on Tuesday
to cut the general government deficit to the European Union's
limit of 3 percent of gross domestic product (GDP) in 2013, a
year later than had been promised.
Standard&Poor's said Poland was doing enough to safeguard
its A- rating and stable outlook, adding that it expected debt
levels to stabilise. []
Poland's finance ministry will offer 3 to 6 billion zlotys
worth of 2-year and 5-year bonds at Wednesday's tender, which
dealers said would attract a healthy demand. Results are due at
1000 GMT.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.711 24.645 -0.27% +6.5%
Polish zloty <EURPLN=> 3.992 3.98 -0.3% +2.81%
Hungarian forint <EURHUF=> 281.48 281.04 -0.16% -3.95%
Croatian kuna <EURHRK=> 7.232 7.229 -0.04% +1.07%
Romanian leu <EURRON=> 4.237 4.241 +0.09% +0.01%
Serbian dinar <EURRSD=> 105.96 106.73 +0.73% -9.51%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +7 basis points to +75bps over bmk*
7-yr T-bond CZ7YT=RR +6 basis points to +106bps over bmk*
10-yr T-bond CZ9YT=RR +8 basis points to +99bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +397bps over bmk*
5-yr T-bond PL5YT=RR +11 basis points to +383bps over bmk*
10-yr T-bond PL10YT=RR +8 basis points to +322bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -2 basis points to +581bps over bmk*
5-yr T-bond HU5YT=RR +6 basis points to +544bps over bmk*
10-yr T-bond HU10YT=RR +6 basis points to +451bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1505 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; editing by Patrick Graham/Ruth Pitchford/David
Brough)
