* CEE assets firm as euro rebound shows lower risk aversion
* Forint leads on stop-loss euro selling ahead of cbank meet
* Czech assets drop on election uncertainty
(Adds details, fresh prices)
BUDAPEST, May 28 (Reuters) - The crown <EURCZK=> eased on
Friday despite a broad-based rebound in Central Europe, before
Czech polling stations open later in the day for parliamentary
elections which may bring political uncertainty.[]
The region's assets were regaining some ground following the
past weeks' deep losses as the euro <EUR=>, the region's
reference unit, rose, indicating that risk aversion caused by
the euro zone debt crisis was abating for the time being.
Currency gains were led by the forint <EURHUF=> which was
pushed into the stop-loss levels of some market participants in
the last session before the Hungarian central bank's (NBH)
upcoming rate-setting meeting, reviving hopes for a rate cut.
Poland's zloty was also supported by Thursday's announcement
that International Monetary Fund economist Marek Belka was the
candidate to head Poland's central bank to replace former
Governor Slawomir Skrzypek, who was killed in a plane crash last
month. []
"The improvement of global sentiment is favourable for the
Polish zloty and if no worsening occurs, there are chances that
the Polish zloty will end the week not only below 4.10 against
the euro, but even close to 4.00," BPH bank said in its morning
note to clients.
At 1013 GMT, the forint was up 0.75 percent versus the euro
at 273.51, though it was off the day's peak at 272 and remained
the only currency in the region apart from the Serbian dinar
<EURRSD=> which has eased this year.
The zloty <EURPLN=> was up 0.2 percent, the Czech
crown<EURCZK=> eased 0.2 percent, and the Romanian leu <EURRON=>
shed 0.1 percent.
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For stories on the Czech election, see []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Market players fear the outcome of Czech parliamentary polls
could lead to a long period of political wrangling that may
delay much-needed fiscal cuts.
Czechs start voting on Friday for a new administration which
needs a mandate to push through key economic reforms, after the
year-long rule of a technocrat government which was praised for
competence but lacked power to push through reforms.
Opinion polls predict a tight result that may lead to
lengthy coalition talks and a weak government that may not have
the power to push through reforms.
"The election results are expected to be a close call... and
a potential political stalemate could make the approval of
fiscally restrictive measures more difficult," CIB Bank said in
a daily note on Friday.
"The impact on bonds would probably be slightly negative in
case the left wins," Dalimil Vyskovsky, an interest rate trader
at Komercni Banka, wrote in a morning note.
"The right getting the majority might be short-term positive
but more likely neutral for government debt instruments."
Czech stocks led regional gains, with the main equity index
<> firming 2.3 percent by 1027 GMT.
But the spreads of Czech bonds over corresponding Bunds rose
slightly, while Czech and Hungarian bond prices rose. Hungarian
bond yields which had risen about one percentage point since
multi-year lows last month dropped on Friday by 10-14 basis
points.
In a Reuters poll most analysts projected earlier this week
that the NBH would keep its rates on hold on Monday after an
unbroken streak of cuts since July, but the forint's rebound may
tip the balance towards a cut, some dealers said.
"Now I think there will be a cut, but I maintain my earlier
view that the forint would weaken again to around 280," one
fixed income trader said.
The leu eased as local markets remained wary of possible
challenges for the government's austerity plans, crucial to
secure further IMF support.
A confidence vote on the package is expected some time next
week, when unions also plan a general strike.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.671 25.622 -0.19% +2.52%
Polish zloty <EURPLN=> 4.063 4.071 +0.2% +1.01%
Hungarian forint <EURHUF=> 273.51 275.57 +0.75% -1.16%
Croatian kuna <EURHRK=> 7.263 7.263 0% +0.64%
Romanian leu <EURRON=> 4.16 4.155 -0.12% +1.86%
Serbian dinar <EURRSD=> 102.48 102.703 +0.22% -6.44%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +4 basis points to 124bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +151bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +135bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +406bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +368bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +309bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -13 basis points to +546bps over bmk*
5-yr T-bond HU5YT=RR -14 basis points to +512bps over bmk*
10-yr T-bond HU10YT=RR -10 basis points to +448bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1213 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Krisztina Than; Editing by Stephen Nisbet)
