* Polish bonds weaker on rate hike expectations
* Leu, forint ease after end-2010 firming
* Worries over euro zone crisis are key CEE theme in 2011
(Updates throughout)
By Krisztina Than and Dagmara Leszkowicz
BUDAPEST/WARSAW, Jan 3 (Reuters) - Emerging European
currencies were mixed on Monday and Polish bonds eased after a
finance ministry inflation forecast and comments by central
bankers raised expectations for an early interest rate rise.
The Polish finance ministry said inflation likely
accelerated to 3.1 percent on an annual basis last month, a
reading that prompted a member of the 10-strong Monetary Policy
Council who has previously resisted rate increases to say a hike
may be necessary. []
"Today's macro estimates just confirmed an expected jump in
inflation and this weakened Polish debt," said one Warsaw-based
dealer.
Polish 3x6 forward rates agreements <PLNFRA> -- which show
where markets project rates in the coming months -- jumped some
6 basis points and now show a likely 40 basis point rise in the
next three months, or one guaranteed hike of 25 basis points and
a small chance of more.
Polish bond yields rose some 5-10 basis points across the
curve and dealers said there was still potential for further
weakening.
In the Czech Republic, the finance ministry's data showed
the central state budget gap fell by almost 36.1 billion crowns
to 156.3 billion crowns ($8.36) last year, below the ministry's
target. But analysts said the data was neutral for the Czech
crown <EURCZK=>. []
By 1432 GMT the Czech unit was some 0.2 percent weaker,
while the Polish zloty <EURPLN=> edged 0.1 percent higher
against the common currency.
Romania's leu <EURRON=> shed 0.7 percent to 4.27 and the
forint <EURHUF=> weakened by 0.1 percent to 278.1, with both
currencies giving up gains posted before their end-2010 fixing
as Hungary's government marked its first working day as holder
of the European Union's rotating six-month presidency.
[]
"In the next days and weeks Hungarian markets will be in a
stance of waiting for the (economic) measures the government is
due to announce in February," one dealer said.
"(Regional) turnover is low... Normal trade will resume only
after the U.S. returns ... in the afternoon and London
tomorrow," a Budapest-based currency trader said. London and
Tokyo markets were closed on Monday.
EURO ZONE DEBT CRISIS
Dealers said the debt crisis in the euro zone and efforts
there to curb public debt and deficits would remain key themes
for central European markets this year.
The forint has been more vulnerable to news about the crisis
than its regional peers due to Hungary's high debt burden and
because a large amount of Swiss franc <EURCHF=> debt is held by
Hungarian households.
"The franc is set to firm further against the euro (and the
forint) and that could change only if the euro zone debt
situation improves or the yuan firms, helping the European
economy," the first dealer said.
"Now we cannot rule out that the franc will reach 230
against the forint <CHFHUF=>... and (franc loan holders) cannot
do anything but tighten their belts."
Komercni Banka said in a note that the Czech government's
reform drive would also be key for the crown.
"The first months of the year will be key because the
government should introduce details of its reform steps, namely
in the area of pensions," Komercni Bank analyst Jan Vejmelek
said.
"If it fails and the positive fiscal expectations are not
met, investors could react negatively... If it succeeds, we
could see some positive reaction on the part of rating agencies
which would undoubtedly help the domestic currency."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local
close currency
change
today
Czech crown <EURCZK=> 25.074 25.02 -0.22%
Polish zloty <EURPLN=> 3.951 3.955 +0.1%
Hungarian forint <EURHUF=> 278.1 277.77 -0.12%
Croatian kuna <EURHRK=> 7.384 7.383 -0.01%
Romanian leu <EURRON=> 4.273 4.241 -0.75%
Serbian dinar <EURRSD=> 106.11 105.89 -0.21%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -15 basis points to 88bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +86bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +94bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +12 basis points to +402bps over bmk*
5-yr T-bond PL5YT=RR +7 basis points to +371bps over bmk*
10-yr T-bond PL10YT=RR +5 basis points to +316bps over bmk*
The P
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +5 basis points to +665bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +597bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +491bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1532 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Krisztina Than and
Dagmara Leszkowicz; Editing by Patrick Graham)
