* Forint trims gains, sticks to key support level
* Romania court backs vital reform bill, lifts leu
* Poland, Czechs sell bonds smoothly at auctions
(Updates throughout)
By Dagmara Leszkowicz and Sandor Peto
WARSAW/BUDAPEST, Oct 6 (Reuters) - Central European assets
were mixed on Wednesday as the forint retreated from key
technical levels, but the leu rose after Romania's top court
backed a reform bill vital to keeping an IMF aid deal on track.
Poland and the Czech Republic smoothly sold government bonds
at auctions, while the region's stock markets were mixed.
The forint traded on the weak side of the key 270 level
against the euro, which the currency crossed on Tuesday after
firming more than seven percent since early last month when the
Hungarian government promised budget deficit cuts for 2011.
At 1408 GMT it was bid at 270.5, down 0.4 percent from
Tuesday. Poland's zloty eased 0.1 percent to 3.949, the Czech
crown firmed 0.2 percent to 24.442, while Romania's leu
<EURRON=> gained 0.3 percent to 4.268.
The zloty and the crown have firmed 4 and 8 percent this
year respectively, but the forint and the leu -- economies with
weaker fundamentals -- are slightly weaker than late last year.
Increased risk appetite in the world helped most of the
region's currencies and bonds firm in the past months and the
zloty is seen leading the pack into further gains in the next 12
months according to a Reuters poll of analysts.[]
The forint, however, is expected to retreat in the next few
weeks, to around 275.<FXEURHUF>
"We still see fiscal policy as being the most decisive
factor in the forint's future trend," said Gyorgy Barta, analyst
at CIB Bank.
Romanian markets had mostly priced in a rejection by the
Constitutional Court of government-backed pension reforms as the
court had already thrown out some savings measures earlier this
year. The approval pushed the leu up.
But dealers said the approval [] did not clear
the way entirely for the government, which has a thin
parliamentary majority and has struggled to sell local debt to
investors and banks.
The opposition is also set to file a no-confidence vote
against the government ahead of an IMF mission review of the 20
billion euro aid package at the end of October.
CZECHS, POLES SELL BONDS
The Czech government sold 4.25 billion crowns worth of
5-year bonds, extending a string of successful debt auctions
underpinned by plans to cut the budget deficit, and increased
flows to emerging markets. [] []
The average auction yield was 2.623 percent, slightly above
the yield at the previous auction a month ago, but the spread
over corresponding German Bunds tightened to 124 basis points
from 138 basis points.
Czech bond yields dropped after the auction, the five-year
bond <CZ1002737=> yield falling 9 basis points.
Poland sold 3 billion zlotys worth of new 2-year bonds at an
auction, at the top of the planned 2-3 billion zloty range, and
a further 0.6 billion zlotys worth of the papers at a top-up
tender.
Hungary will hold bond auctions on Thursday. <HUISSUE>
Hungarian bonds gave up most of their early gains by late
trade, but yields stayed near the 4-5 month lows reached in the
past few days.
"Mostly international factors will show the direction in the
short term as we will learn details of the 2011 budget only on
Oct. 15 or later," one Budapest-based fixed income trader said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.442 24.489 +0.19% +7.68%
Polish zloty <EURPLN=> 3.949 3.947 -0.05% +3.93%
Hungarian forint <EURHUF=> 270.5 269.5 -0.37% -0.06%
Croatian kuna <EURHRK=> 7.315 7.303 -0.16% -0.08%
Romanian leu <EURRON=> 4.268 4.281 +0.3% -0.72%
Serbian dinar <EURRSD=> 105.82 105.94 +0.11% -9.39%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +8 basis points to 79bps over bmk*
7-yr T-bond CZ7YT=RR +5 basis points to +102bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +102bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +465bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +360bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +235bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +4 basis points to +542bps over bmk*
5-yr T-bond HU5YT=RR +4 basis points to +504bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +438bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1608 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz
and Jason Hovet; Editing by Tim Pearce and Susan Fenton)
