* FX stronger, buoyed by higher risk appetite
* Poland economy seen growing 3.1 percent this year
(adds fixed income, quote)
By Marius Zaharia
BUCHAREST, Feb 26 (Reuters) - The Polish zloty led gains in
central Europe on Friday, helped by stronger stocks worldwide,
but dealers say currencies will remain sensitive to any jitters
caused by Greece.
The region's currencies have not been hammered by Greece's
fiscal woes because analysts consider central Europe to be in a
better debt position for now than parts of the euro zone, but
they have faced volatility, which dealers say will likely
continue to dominate markets.
On Thursday, warnings by credit ratings agencies that they
could cut Greece's rating [] had weakened
currencies, with the zloty briefly falling beyond 4.0 per euro,
but a rally in U.S. and Asian stocks overnight have helped them
recover.
At 1037 GMT, the Polish zloty <EURPLN=> was up 1 percent,
the Czech crown <EURCZK=> was up 0.5 percent, the Hungarian
forint <EURHUF=> was 0.6 percent stronger, while the Romanian
leu <EURRON=> was 0.4 percent firmer.
"Thursday showed that the EURPLN is not strong enough to go
up further; besides, stocks are up and the euro rebounded
against the dollar," said a Warsaw-based dealer.
Polish bonds were slightly stronger at the longer end of the
curve, while the shorter end was relatively stable.
Analysts said longer-dated bonds may strengthen while 2-year
paper may fall given that most of Poland's newly appointed
Monetary Policy Council (MPC) members have already signalled
interest rates may be raised in the second half of the year.
Hungarian bonds were relatively stable compared to the
previous close, but yields were up 8-10 basis points from
Thursday's 3-year bond auction which produced the lowest average
yield since July 2007 [].
BAD DEBT, BUDGETS AND JOBS
Central Europe is seen having a modest and choppy recovery
this year, with Poland the most likely outperformer. Its central
bank said on Friday it expects the economy to grow by 3.1
percent in 2010 and slow to 2.9 percent in 2011. []
But worries remain over how much the fiscal tightening
processes that have already started in most countries will limit
growth, while unemployment and bad loans have yet to peak in
some parts.
On Friday, Austria's Erste bank <ERST.VI> posted
higher-than-expected bad debt charges and said it expected risk
costs to remain "elevated" throughout 2010. []
Poland's central bank expressed doubts on Friday that the
public finance deficit would be cut to 3 percent as the
government expects [] and added reforms were needed
to avoid a similar fate to that of Greece.
Hungary's three-month rolling unemployment rate <HUU3MQ=ECI>
was 10.8 percent in the November-January period after 10.5
percent in the fourth quarter, the Central Statistics Office
(KSH) said.
The rate is the highest since the first quarter of 1994 when
it stood at 11.5 percent, a KSH official said. []
Dealers said uncertainty created by all these factors,
coupled with risks related to elections throughout the region
and turmoil in Greece are keeping volatility high.
"There are no clear bets on a trend in the region, no story
is bought," one dealer in Bucharest said. "Greece has not hurt
markets too badly, but it's still there and its problems are big
so (regional) markets don't really know how to react."
"For now, we remain fragile (with regard) to risk appetite
and anything that comes out on Greece."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.907 26.027 +0.46% +1.59%
Polish zloty <EURPLN=> 3.965 4.003 +0.96% +3.51%
Hungarian forint <EURHUF=> 269.57 271.07 +0.56% +0.29%
Croatian kuna <EURHRK=> 7.269 7.269 0% +0.55%
Romanian leu <EURRON=> 4.104 4.119 +0.37% +3.25%
Serbian dinar <EURRSD=> 99.579 99.557 -0.02% -3.71%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -4 basis points to 95bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +130bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +107bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +400bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +333bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +289bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +543bps over bmk*
5-yr T-bond HU5YT=RR -6 basis points to +489bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +443bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1237 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia;
Editing by Robin Pomeroy/Ruth Pitchford)
