* Polish bonds gain, zloty falls as cbank hawk softens
* Irish debt worry weighs on region, stocks drop
(Updates throughout)
By Marius Zaharia and Dagmara Leszkowicz
BUCHAREST/WARSAW, Nov 16 (Reuters) - Polish bonds gained on
Tuesday and the zloty fell as a hawkish central banker talked
down the possibility of a rise in interest rates next week,
citing the currency's recent strength.
The zloty weakened more than other emerging Euroepean
currencies, which were also weighed down as investors remained
sensitive to any sign that Ireland is ready to bow to pressure
and seek a bailout.
Polish policymaker Andrzej Bratkowski changed his stance
after as recently as last week calling for a series of 25 basis
point hikes as soon as possible. []
Polish bonds outperformed regional peers in response, with
the two-year paper yielding 11 basis points less than the close
on Monday.
"The market paid attention to Bratkowski's comments, who
was, so far, the strongest hawk and now he's speaking about a
lack of rate hike this month," said Adrian Skubij, dealer at ING
bank in Warsaw.
His comments came after October inflation on Monday that was
a touch below forecast and raised more doubts over market
expectations of a rate rise as soon as this month.
[]
Governor Marek Belka said on Monday the country's improving
growth outlook could warrant some rate tightening, but further
zloty appreciation would curb the scope for it. []
"The tug-of-war within the MPC (Monetary Policy Council) is
likely to continue this week, further fuelling uncertainty
regarding a rate rise next week," Commerzbank said in a note.
"The zloty's upward potential therefore remains limited (in
the) short term."
By 1454 GMT, the zloty <EURPLN=> lost 0.6 percent to 3.95 to
the euro. The Hungarian forint <EURHUF=> inched 0.3 percent
lower. The Czech crown <EURCZK=> and Romania's leu <EURRON=>
fell less than 0.1 percent.
IRELAND'S IMPACT
Budapest stocks dropped back near 4-1/2 month low hit last
week, leading stock losses in the region.
Central European assets tend to suffer when worries about
the currency bloc's debt crisis rise and investors take risk off
the table. But the fall in the credibility of some of the euro
zone's smaller borrowers makes some of the less indebted
economies further east look like better bets.
Dealers said any sign of moves toward an Irish bailout from
a meeting of euro zone finance ministers in Brussels on Tuesday
could be positive for emerging Europe in the short-term, before
focus turns to other indebted states.
Most at risk from a rise in risk aversion are Hungary, whose
2011 budget is based on special corporate taxes which may in
turn delay economic recovery, and Romania, whose financing
ability depends largely on aid flows from the International
Monetary Fund and other lenders.
The cost of insuring Hungary's debt rose 9 basis points on
Tuesday to 322, while Romania's rose 3 basis points to 313.
Despite better fundamentals, Polish markets, the most liquid
in the region, are also sensitive to shifts in risk appetite.
"An Irish bailout should be positive (for the region), but
there's talk about Portugal having (debt) problems as well,"
another dealer in Bucharest said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.579 24.557 -0.09% +7.08%
Polish zloty <EURPLN=> 3.95 3.925 -0.63% +3.9%
Hungarian forint <EURHUF=> 277.35 276.4 -0.34% -2.52%
Croatian kuna <EURHRK=> 7.386 7.395 +0.12% -1.04%
Romanian leu <EURRON=> 4.295 4.292 -0.07% -1.34%
Serbian dinar <EURRSD=> 106.64 106.69 +0.05% -10.09%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 75bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +80bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +97bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +368bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +358bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +315bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +13 basis points to +574bps over bmk*
5-yr T-bond HU5YT=RR +7 basis points to +542bps over bmk*
10-yr T-bond HU10YT=RR +7 basis points to +465bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1556 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 []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
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 Marius Zaharia;
Editing by Patrick Graham/Ruth Pitchford)
