* S&P cut cuts short rally triggered by Greek news
* Czechs hold off on Eurobond, Poles may cut debt issues
* Poland's central bank keeps rates on hold as expected
* Greek debt crisis still a risk for CEE markets
(Updates throughout)
By Marius Zaharia and Sandor Peto
BUCHAREST/BUDAPEST, April 28 (Reuters) - Central European
assets reversed a rebound late on Wednesday when Standard &
Poor's cut its ratings on Spain.
A rollercoaster trading day showed the European Union's
emerging markets remain vulnerable to events in the euro zone,
reacting to shifting expectations on a Greek aid package and a
wave of rating downgrades in the euro zone's periphery.
In the morning the forint <EURHUF=> and the zloty <EURPLN=>
fell to two-month lows against the euro, and the Czech crown
<EURCZK=> hit seven-week lows, drawing attention away from a
Polish central bank decision to leave interest rates unchanged.
Markets fear debt-laden Greece may not secure aid in time to
meet a deadline of May 19 when a maturing bond needs to be
refinanced. Central European assets have been under heavy
selling pressure since late on Tuesday when Standard & Poor's
downgraded Greece to junk status and also cut Portugal's credit
rating.
Czech Finance Minister Eduard Janota said on Wednesday his
country would hold off on an expected Eurobond issue due to the
market turmoil [] and Poland said it may also trim
debt issuance. []
The region's currencies, equities and government bonds
rebounded after German lawmakers quoted International Monetary
Fund head Dominique Strauss-Kahn as saying the IMF and euro zone
would give more aid to Greece than initially expected.
[]
The debt and fiscal position of Central European states are
healthier than those of Greece and some other countries in the
euro zone periphery, but the region remains vulnerable to dips
in risk appetite, dealers and analysts said.
"Further jitters (in the region's markets) cannot be ruled
out," one Budapest-based currency dealer said. "The Greek
problem is not solved yet, we will see more clearly only when
funds actually start to flow into Greece."
Bulgaria and Romania are seen as most vulnerable as Greek
banks account for 15-20 percent of their total banking assets,
while concern over the new Hungarian government's fiscal policy
could keep the forint under pressure, Capital Economics said in
a note.
CENTRAL BANKS SEE RISKS
Taking a hit from the Spanish downgrade, the forint was 0.3
percent down from Tuesday versus the euro at 1548 GMT. The leu
<EURRON=> shed 0.2 percent, while the crown and the zloty
retreated to trade flat.
The forint and Hungarian bonds, regional outperformers this
month, bore the brunt of the early falls, which erased gains
posted after opposition party Fidesz secured a strong majority
in the April 11 and 25 parliamentary elections.
Bond yields, which jumped 35-40 basis points in the morning,
dropped almost as much by late trade but the curve steepened as
10-year bond prices recovered only partially.
In the Czech Republic, 10-year bond yields <CZ9YT=RR> jumped
to an April high.
Poland's central bank left interest rates unchanged at its
first rate-setting meeting since the death of Governor Slawomir
Skrzypek in a plane crash earlier this month, and the bank noted
in a statement that the Greek crisis deepened uncertainty in
international markets. []
Romania's central bank Governor Mugur Isarescu said the
Greek crisis could affect the leu, but Romanian banks with Greek
capital were well capitalized and any broader impact on the
economy would be limited. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.562 25.577 +0.06% +2.96%
Polish zloty <EURPLN=> 3.933 3.933 0% +4.35%
Hungarian forint <EURHUF=> 269.82 268.96 -0.32% +0.2%
Croatian kuna <EURHRK=> 7.246 7.249 +0.04% +0.87%
Romanian leu <EURRON=> 4.141 4.134 -0.17% +2.33%
Serbian dinar <EURRSD=> 99.347 99.15 -0.2% -3.49%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +7 basis points to 73bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +81bps over bmk*
10-yr T-bond CZ9YT=RR +5 basis points to +81bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -2 basis points to +443bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +386bps over bmk*
10-yr T-bond HU10YT=RR +16 basis points to +369bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1748 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
Sandor Peto; Editing by Ian Jones and Susan Fenton; editing by
John Stonestreet)
