* IMF/EU approve next tranche of Romania aid programme
* Serb c.bank sells no euros at auction
* Romania holds rates; eyes on Czech cbank as crown strong
* Good demand at Polish,Czech bond sales
(Updates with bond sales, Romania cbank decision)
By Krisztina Than and Jason Hovet
BUDAPEST/PRAGUE, Aug 4 (Reuters) - Strong investor demand at
Czech and Polish bond auctions on Wednesday buoyed the crown and
zloty as other east European currencies cut losses with a slight
recovery in risk appetite.
Romania's international lenders extended a 20 billion euro
aid programme for the country still stuck in recession, and its
central bank left interest rates unchanged as expected while it
assesses a tax increase's impact on the economy. []
The outcome of talks with the International Monetary Fund
came as no surprise after a government minister told Reuters on
Tuesday the IMF would set no fresh conditions on the package,
and the leu currency showed little reaction. []
Elsewhere in the region, Serbia's central bank did not sell
euros at an auction it called to prop up the dinar, which
dropped to a record low of 107 to the euro on Tuesday but has
bounced a touch to 105.96 since. []
Investors bought riskier emerging market assets after better
U.S. jobs data in the afternoon, helping central Europe cut
losses. By 1348 GMT the Polish zloty <EURPLN=> was bid flat on
the day on the strong side of 4.0 per euro.
The Hungarian forint <EURHUF=> rose 0.2 percent. The Czech
crown <EURCZK=> was up 0.4 percent, while the leu <EURRON=> was
0.3 percent lower from Tuesday's close
Shares were mixed with Warsaw <> climbing 0.8 percent
and Bucharest <> falling 0.3 percent.
BOND SALES
Investors have turned a sharper eye on government finances
in central Europe. Hungary's new administration halted talks
with lender the International Monetary Fund in July, while
worries stay high over IMF-mandated austerity in Romania.
Poland held its first debt auction since approving a
long-term fiscal plan on Tuesday that sees the country cutting
its budget deficit to 3 percent of GDP by 2013, with measures
including a partial value-added tax (VAT) hike of 1 percentage
point. []
"S&P supported the Polish fiscal plans in a comment
yesterday, stating that they believe that the Polish government
is doing enough to keep public finances under control," Danske
Bank said in a note on Wednesday.
"We are disappointed in (it) ... as it lacks proposed
structural reforms of the labour market and the pension system."
Demand for the 3- and 5-year bonds at Wednesday's auction
was double the supply, but yields ticked up from a month ago.
The yield on a Czech 3-year bond <CZ1002729=> fell at
auction on Wednesday, and investors bid almost three times the
offer. The yield on the secondary market fell around 10 basis
points after the auction before rising slightly. It was quoted
flat on the day at 2.38 percent by late afternoon.
The Czech Republic and Poland are seen as better placed
fundamentally than IMF-loan recipients Hungary and Romania, and
have faced no financing pressures this year.
The Czech crown has held at 20-month highs this week around
24.70 per euro, helped by London buying, dealers said. Analysts
have expected a retreat to 25 per euro level where central
bankers have verbally intervened in the past.
Analysts and markets expect policymakers to keep Czech rates
unchanged at record lows at a Thursday meeting, but will be
listening for comments on the crown.
"We can expect some comments from the central bank
tomorrow," a Prague dealer said, adding the crown was not ready
to budge from recent levels.
"There is still big selling interest (in the euro versus
crown) around 24.800, with London names on the selling side."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.697 24.793 +0.39% +6.56%
Polish zloty <EURPLN=> 3.995 3.995 0% +2.73%
Hungarian forint <EURHUF=> 280.8 281.3 +0.18% -3.72%
Croatian kuna <EURHRK=> 7.223 7.232 +0.12% +1.19%
Romanian leu <EURRON=> 4.25 4.239 -0.26% -0.3%
Serbian dinar <EURRSD=> 105.58 106.27 +0.65% -9.19%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +15 basis points to 118bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +109bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +113bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1550 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Krisztina Than and
Jason Hovet; Editing by John Stonestreet/Ruth Pitchford/David
Brough)
