* Forint little changed by rate cut, stocks at 10-mth highs
* Romania eyes 5-10 yr eurobond worth 0.5-1.5 bln euros
* Budapest bourse's 6.6 pct rise highest since Feb
(Adds stock markets close)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, Aug 24 (Reuters) - The Hungarian forint
was little moved after the central bank cut rates as expected on
Monday, while regional stocks continued their rally to reach
10-month highs.
Hungary's central bank cut its key interest rates by 50
basis points in line with market expectations on Monday as it
tries to address a severe economic contraction [].
"If they (central bank) continue to follow the market on
rate cuts, the currency could remain relatively stable and
yields could respond to incoming news instead of the EUR/HUF,"
said Gyorgy Barcza from K&H Bank.
At 1520 GMT, the forint <EURHUF=>, the Polish zloty
<EURPLN=> and the Czech crown <EURCZK=> were all about 0.3
percent higher from the previous domestic close.
The forint edged up briefly after the announcement as some
dealers said a few investors were pricing in a larger cut,
judging by Hungary's track record of surprising markets, but it
immediately regrouped with peers.
Hungarian <>, Polish <> and Romanian <>
stocks rose to 10-month highs, while Prague's bourse <> also
gained almost 5 percent.
The Budapest exchange showed its biggest one-day gain since
February, at 6.6 percent, while Prague's index rose at its
fastest pace since May and neared the 1,200 point level for the
first time since October.
Czech Republic already got out of recession and as figures
and business sentiment improve in the region's main export
markets, such as Germany, investors are pricing in more signs of
recovery in the east towards the end of the year.
Last week, JP Morgan upgraded Poland, Czech Republic and
Hungary to overweight from underweight due to narrowing credit
spreads and stronger euro zone economic growth. []
The forint, zloty and crown firmed around 1 percent last
week, with the Czech unit touching its highest this year.
Currency strength has boosted debt markets in the region, with
yields moving lower again on Monday.
ATTRACTIVE DEBT
Hungarian bond yields fell some 40 basis points, catching up
with peers after its markets were closed on Thursday and Friday.
As investors become increasingly interested in eastern
European debt, governments are switching to foreign debt issues
to ease the pressure on domestic markets, where supply jumped
because of widening budget deficits.
Romania said on Monday it aimed for a 5- to 10-year Eurobond
worth between 0.5 and 1.5 billion euros [].
"The market continues basically to gain confidence on a good
end of the year in terms of emerging market spreads," said
Commerzbank's Luis Costa. "That of itself creates a nice window
of opportunity for Romania to come ... and test the waters.
Poland sold 860 million zlotys in 52-week t-bills on Monday
and the auction was heavily oversubscribed [], but
Romania rejected all bids at a similar tender as it aims for
lower yields [].
While Hungary is expected to continue its rate easing cycle
further, more analysts say Poland's central bank is at an end
with its one [].
"In Poland, the easing cycle is arguably over, with the
balance of risks likely to be shifting towards tightening from
now on (albeit very gradually)", analysts at Merrill Lynch wrote
in a note on Friday.
In the Czech Republic, a central banker warned high fiscal
deficits could end the traditionally low interest rate
environment and cause currency volatility [].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.364 25.451 +0.34% +5.48%
Polish zloty <EURPLN=> 4.096 4.107 +0.27% +0.46%
Hungarian forint <EURHUF=> 267.31 268.18 +0.33% -1.41%
Croatian kuna <EURHRK=> 7.323 7.305 -0.25% +0.57%
Romanian leu <EURRON=> 4.218 4.219 +0.02% -4.83%
Serbian dinar <EURRSD=> 92.987 92.902 -0.09% -3.77%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 73bps over bmk*
4-yr T-bond CZ4YT=RR -16 basis points to +131bps over bmk*
8-yr T-bond CZ8YT=RR -1 basis points to +250bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -37 basis points to +632bps over bmk*
5-yr T-bond HU5YT=RR -41 basis points to +562bps over bmk*
10-yr T-bond HU10YT=RR -41 basis points to +477bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1820 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets:
All emerging market news []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
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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 Marius Zaharia, editing by Stephen Nisbet)
