* Polish zloty weakens thru 4.0/euro after Fed move
* Janota comments lift Czech bonds
* Hungary 3-yr yield at 11-week low ahead of rate meeting
BUDAPEST, Feb 19 (Reuters) - Financial assets in Eastern
Europe's emerging markets were mixed on Friday as investors
pondered a surprise U.S. Federal Reserve move to raise an
emergency lending rate.
The Polish zloty retreated through the key technical level
of 4.0 versus the euro while Hungarian three-year government
bond yields traded around 11-week lows ahead of an expected rate
cut by the central bank (NBH) on Monday.
Czech bond prices also firmed, helped by comments from
Finance Minister Eduard Janota that the country planned a
eurobond issue in the first half of the year. []
The Fed move initially triggered currency, equity and bond
sales in Central Europe but markets rebounded as the Fed moved
to calm speculation that it would bring forward policy
tightening which could cut appetite for emerging market assets.
"One reading is that the Fed already knows something, that
the world economy recovers and that can be good for emerging
markets," one Budapest-based bond trader said.
"Buying by foreigners held up the initial (Hungarian
government bond) selling. There is not much change (in yields)
since then but the buying side is stronger," the trader added.
Three-year yields were two basis points lower from Thursday
at around 6.88 percent, levels last seen in early December.
Most analysts expect Hungary's NBH to cut its 6 percent base
rate further by 25 basis points on Monday []. Many
currency and bond traders have become sceptical over the analyst
forecast that Monday's move could be followed by another cut.
"We will watch the comments from the bank... the easing
priced in by the markets has been changing up and down (in the
past weeks), that's clear that we are already very close to the
bottom of rates," one bond trader said.
RATE HIKES EXPECTED LATER
The Czech Republic and Poland, which have better
fundamentals, are over their own monetary easing cycles and are
expected to hike their respective 1.0 and 3.5 percent rates
later this year.
If central banks in the world's major economies start to
lift their rates later this year that could support hikes in
Central Europe as well.
The Fed's emergency lending rate move still did not cause a
drop in the price of Czech bonds which were buoyed by Janota's
comments that the Czechs may raise 1-2 billion euros through a
10-15 year Eurobond issue in the first half.
The yield on the 15-year Czech bond dropped to its lowest
since Feb 3, quoted at 5.047/4.904 percent. An auction of the
bond was cut in half last week due to its rising yield.
"(The Eurobond comment) is definitely good news for the
domestic bond market after the poor result of the last bond
auction (of the 15-year government benchmark) last week," CSOB
wrote in a morning market note.
Polish short-dated bond yields, however, rose by some three
basis points as the zloty fell against the euro, trading at
4.005 at 1042 GMT, weaker by 0.3 percent from Thursday.
The Czech crown <EURCZK=> and the Hungarian forint <EURHUF=>
were flat, while Romania's leu <EURRON=> shed 0.1 percent.
"The market lacks direction," one dealer in Bucharest said.
"It's hard to pick one as long as you can't stop thinking about
Greece. This mood normally leads to weakening, but this week CEE
has proved quite resilient."
Dealers said the forint was likely to stay close to the 270
resistance versus the euro in the short-term.
"There are no big speculative positions (built by foreign
investors) in the forint, we are let alone," one dealer said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.694 25.683 -0.04% +2.43%
Polish zloty <EURPLN=> 4.005 3.992 -0.32% +2.47%
Hungarian forint <EURHUF=> 271.35 271.45 +0.04% -0.37%
Croatian kuna <EURHRK=> 7.285 7.289 +0.05% +0.33%
Romanian leu <EURRON=> 4.133 4.129 -0.1% +2.53%
Serbian dinar <EURRSD=> 98.62 98.737 +0.12% -2.78%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -3 basis points to 87bps over bmk*
7-yr T-bond CZ7YT=RR -6 basis points to +125bps over bmk*
10-yr T-bond CZ10YT=RR -8 basis points to +105bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +388bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +320bps over bmk*
10-yr T-bond PL10YT=RR -4 basis points to +284bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +539bps over bmk*
5-yr T-bond HU5YT=RR -4 basis points to +486bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +442bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1142 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Krisztina Than/Sandor Peto; editing by Jon Boyle)
