* Romanian debt tender closely watched
* Forint leads modest gains as risk sentiment improves
* Zloty may find support in Bank Zachodni WBK sale
(Updates with fixed income markets, fresh quotes)
By Marius Zaharia
BUCHAREST, Sept 13 (Reuters) - Eyes were on a debt tender in
Romania on Monday that may signal the end of its self-imposed
yield capping strategy, while emerging European currencies and
bonds edged up helped by improved global risk sentiment.
Romania is seen struggling again to sell the planned 1
billion lei worth of one-year treasury-bills later on Monday and
it may be forced to either scrap its 7 percent yield ceiling or
focus even more on shorter-term money markets and euro debt.
[]
Investors are demanding higher rates of return ahead of a
series of crunch votes on the coalition government's austerity
measures which could derail a 20 billion euro International
Monetary Fund-led bailout. []
Until last week Romania had still been able to sell
shorter-term paper but it sold significantly less six-month debt
than planned last Monday. One-year paper was quoted at 7.25
percent early on Monday, though trading was scarce.
Central European bonds have rallied over the past two months
as investors sought higher returns in relatively stable emerging
economies such as Poland or the Czech Republic, while core debt
yields traded at record lows.
Romanian bonds missed out on the rally, however, due to
limited foreign holdings in Romanian debt markets and as local
investors focused on political risk and high short-term
financing needs to ask for ever-higher yields at local tenders.
"If debt managers stick to paying yields up to 7 percent ...
results could show a small issuance size but we would not be too
surprised if all bids are rejected," ING Bank said in a note.
Polish 10-year bond yields were up 3 basis points on Monday,
with investors positioning for a tender on Wednesday. The rest
of Polish paper was flat.
Hungarian government bond yields continued to drop slightly
after last week's rally following a pledge from the government
to cut the budget deficit to below 3 percent of gross domestic
product in 2011 to meet European Union requirements.
"The (bond) yield curve is almost flat because there is
higher demand for the long end," one trader said. "Expectations
for an interest rate hike have pushed up the yields on shorter
papers, and these expectations have not disappeared."
Bets that the central bank could start to reverse rate cuts
delivered since last year increased after minutes of the bank's
last rate meeting showed that Governor Andras Simor voted for a
rate hike, although he was voted down.
Hawkish rate setter Peter Bihari told Reuters on Friday that
the government's deficit pledge may help the bank avoid hikes,
but deciding on rates remains "a difficult consideration".
[]
CURRENCIES EDGE UP
Central European currencies were lifted by upbeat economic
data out of China and new banking rules that went relatively
easier on new capital requirements for banks than some had
feared. Hungary's forint <EURHUF=> led modest gains.
[]
"There is a technical level at around 282.70 which I think
will keep the forint from firming further, while at around
284.50 we have seen people selling," a dealer said.
At 1004 GMT, the forint was 0.2 percent up on the day,
trading at 283.9 per euro, off an intra-day high of 282.9. The
Romanian leu <EURRON=> gained 0.1 percent, while the Polish
zloty <EURPLN=> and the Czech crown <EURCZK=> were flat.
News that Poland's largest lender PKO BP <PKOB.WA> had lost
the race to buy Allied Irish Bank's <ALBK.I> unit Bank Zachodni
WBK <BZWB.WA> could provide some support for the zloty, dealers
said. Spanish banking giant Santander <SAN.MC> was set to take
control of the bank. []
Markets had feared PKO BP would have to sell large amounts
of zlotys for euros to pay for the bank.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.681 24.682 0% +6.63%
Polish zloty <EURPLN=> 3.935 3.935 0% +4.29%
Hungarian forint <EURHUF=> 283.9 284.4 +0.18% -4.77%
Croatian kuna <EURHRK=> 7.283 7.283 0% +0.36%
Romanian leu <EURRON=> 4.26 4.265 +0.12% -0.53%
Serbian dinar <EURRSD=> 104.89 104.81 -0.08% -8.59%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +6 basis points to 101bps over bmk*
7-yr T-bond CZ7YT=RR +7 basis points to +80bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +83bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +393bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +378bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +304bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +599bps over bmk*
5-yr T-bond HU5YT=RR -6 basis points to +557bps over bmk*
10-yr T-bond HU10YT=RR -5 basis points to +460bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1104 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus; Writing by Marius Zaharia;
Editing by Patrick Graham and Susan Fenton)
