* Czech crown hits 9-mo high, up 1 pct despite politics
* Forint, zloty also up, helped by global risk appetite
* Hungarian yields fall further on rate cut hopes
(Adds more details, bonds)
By Michael Winfrey and Krisztina Than
PRAGUE/BUDAPEST, Sept 16 (Reuters) - A Czech election delay
that analysts say may speed fiscal tightening sent the crown
currency to a nine-month high on Wednesday, while stocks and
some of the region's other currencies also gained.
Government debt operations across the region showed strong
demand for debt, with the Czechs selling more floating rate
3-year bonds than planned and the Poles unable to buy back
virtually any of the bills they had targeted for repurchase.
Dealers also cited a bullish mood after Asian stocks rallied
on upbeat U.S. economic news, the dollar slipped and Europe's
stock markets also surged. Eastern European bourses rallied with
Budapest <> up 2.9 percent and Warsaw 1.4 percent <>.
The Czech crown <EURCZK=> was up more than half a percent to
22.225 at 1324 GMT. It has risen 6.1 percent since the start of
the year, but is still down 5.35 from a year ago.
Market watchers said the effective postponement of an early
election there until June could provide further support to the
currency as it was seen positive for the budget [].
Although it raised political uncertainty, it gave parties
impetus to come to a tough compromise after the present
caretaker government said it would not stay on unless it could
meet its plan to tighten the fiscal gap to around 5 percent of
GDP next year, from a forecast of more than 7 percent now.
"On the one hand (the delay) can mean increased
uncertainties and delays in needed reforms," said Frantisek
Kanka, fixed income dealer at Komercni Banka.
"But on the other hand (the interim) government said the
condition for carrying on is to cut the gap to 170 billion
crowns, which is... good news."
The Hungarian forint rose 0.8 percent to 269.86 per euro.
The zloty <EURPLN=> was up 0.46 percent to 4.14. They are still
down 0.6 percent and 2.34 percent this year, respectively.
Asian stocks surged to their highest level this year while
the U.S. dollar fell, after Federal Reserve Chairman Ben
Bernanke said the U.S. recession was "very likely over" though
he added the recovery would be very slow. []
DEBT AUCTIONS
Dealers said the delay helped draw bids for the Czech sale
of 6.858 billion crowns ($396.9 million) of 3-year floating rate
bonds, above a planned 5.95 billion [].
Spreads narrowed from the previous auction by more than 10
basis points, with the highest accepted yield at 33.916 basis
points above the six-month Prague interbank rate (PRIBOR) of
2.14 percent.
In Poland, budget woes prompted investors to hold on to
short-term debt, and a government auction to buy back up to 5.92
billion zlotys in 52-week treasury bills garnered only a
fraction of the goal at 44.5 million []
Dealers said yields were roughly in line with the market but
the announcement that Poland's 2010 central government deficit
will double next year to 52.2 billion zlotys -- driving the
fiscal gap to about 7 percent of GDP -- has hit longer debt.
"Fiscal risks weigh on the long term bonds. Banks now prefer
to have short-term debt i.e. T-bills and short term bonds, so
why would they want to give them away now?," said Piotr Bujak,
senior economist at Bank Zachodni WBK.
The Finance Ministry also said Poland would consider euro-
and yen- denominated bonds in the fourth quarter if market
sentiment stays positive, while it may decide not to issue
longer-dated bonds at regular tenders until the end of the year.
[]
Hungary's bonds extended gains, supported by the currency's
strength and expectations for further interest rate cuts by the
central bank in coming months.
"Yields dropped by 15 basis points at the short end and
around 10 basis points on long papers, and I expect further
steepening in the curve," a Hungarian trader said.
In other developments, Polish corporate wages grew less than
expected and employment fell in August, a sign consumption, the
engine of the European Union's largest ex-communist economy,
faced further stumbling blocks on the road to recovery.
[]
The Romanian leu held largely steady, with regional optimism
offset by uncertainty over IMF-mandated fiscal reforms and the
stability of Romania's ruling centre-left coalition.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.225 25.355 +0.52% +6.06%
Polish zloty <EURPLN=> 4.14 4.159 +0.46% -0.6%
Hungarian forint <EURHUF=> 269.86 272.1 +0.83% -2.34%
Croatian kuna <EURHRK=> 7.291 7.323 +0.44% +1.01%
Romanian leu <EURRON=> 4.261 4.262 +0.02% -5.79%
Serbian dinar <EURRSD=> 93.37 93.45 +0.09% -4.17%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -3 basis points to 198bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +179bps over bmk*
10-yr T-bond CZ10YT=RR -9 basis points to +180bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +388bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +340bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +288bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -14 basis points to +634bps over bmk*
5-yr T-bond HU5YT=RR -13 basis points to +568bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +497bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1506 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by regional bureaux, writing by Krisztina Than;
Editing by Stephen Nisbet/Ruth Pitchford)
