* Polish zloty weakens through 4.0/euro after Fed move
* CEE currencies seen rebounding early next week
* Finmin Eurobond comments lift Czech local bonds
* Hungary 3-yr yield at 11-week low ahead of rate meeting
By Krisztina Than and Sam Cage
BUDAPEST/ZURICH, Feb 19 (Reuters) - Financial assets in
Eastern Europe's emerging markets shrugged off a surprise U.S.
Federal Reserve move to raise an emergency lending rate on
Friday, and analysts said currencies could enjoy a rebound after
weeks of volatility.
The U.S. 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.
Currencies could now regain territory in the early part of
next week, said Cheuvreux strategist Simon Quijano-Evans.
"The bottom line is people were a bit scared of the change
in the Fed discount rate and if anything, we'll get a recovery
in the markets by Monday," he said.
The Polish zloty retreated back to the key technical level
of 4.0 versus the euro <EURPLN=> 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 yields also dropped, helped by comments from
Finance Minister Eduard Janota that the country planned a
Eurobond issue in the first half of the year. []
The yield on the 15-year Czech bond dropped to its lowest
since Feb 3, quoted at 5.081/4.937 percent. An auction of the
bond was cut in half last week due to its rising yield.
HUNGARY FOCUS
The Greek debt crisis has remained high on investors'
radars, raising volatility in the region. A scheduled Hungarian
interest rate decision will take centre stage on Monday.
Most analysts expect Hungary's NBH to cut its 6 percent base
rate further by 25 basis points []. Many currency
and bond traders have become sceptical over forecasts that
Monday's move could be followed by another cut.
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 forint <EURHUF=> moved in a tight range and longer-dated
bonds also moved little with buying interest concentrated on the
short end of the curve ahead of Monday's meeting.
"Forward rate agreements price in 25 bp rate cut and the
expectations continue to buoy the short end," one fixed income
trader said. "But demand for the five-10 year segment is low...
The spread between two-three year yields and long yields has
widened by 30-40 basis points since early this year."
Foreign investors have increased their Hungarian government
bond holdings by some 150 billion forints ($747.5 million) this
year, but have been on the selling side this month.<.HUBONDHOLD>
The Czech crown <EURCZK=>, which firmed past the technical
25.80 per euro level to a two-month high on Thursday, and
Romania's leu <EURRON=> were stable with markets keeping a wary
eye on any risk of a spillover of Greece's debt problems.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.73 25.698 -0.12% +2.29%
Polish zloty <EURPLN=> 4.00 3.992 -0.2% +2.6%
Hungarian forint <EURHUF=> 271.16 271.65 +0.18% -0.3%
Croatian kuna <EURHRK=> 7.283 7.289 +0.08% +0.36%
Romanian leu <EURRON=> 4.13 4.123 -0.17% +2.6%
Serbian dinar <EURRSD=> 98.74 98.737 0% -2.9%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -5 basis points to 86bps over bmk*
7-yr T-bond CZ7YT=RR -8 basis points to +123bps over bmk*
10-yr T-bond CZ10YT=RR -11 basis points to +101bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +390bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +320bps over bmk*
10-yr T-bond PL10YT=RR -4 basis points to +281bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +541bps over bmk*
5-yr T-bond HU5YT=RR -8 basis points to +490bps over bmk*
10-yr T-bond HU10YT=RR -9 basis points to +442bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1512 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
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(Additional reporting by Sandor Peto in Budapest; editing by
Stephen Nisbet)
