* FX stronger on stocks, Greece contagion risk seen moderate
* Poland to sell big chunk of debt in March, bonds unfazed
* Poland cbank sees economy growing 3.1 percent this year
(Releads, adds Polish bond supply, updates markets)
By Marius Zaharia and Marton Dunai
BUCHAREST/BUDAPEST, Feb 26 (Reuters) - The Polish zloty led
a rebound in Eastern European currencies on Friday as dealers
said contagion risk from Greece remained limited for regional
assets.
An overnight stock rally in Asia and the U.S. helped reverse
previous losses in the forex market, incurred after credit
rating agencies warned on Thursday that they could cut Greece's
rating. []
The region's currencies have held ground for weeks despite
Greece's fiscal woes as analysts believe central Europe's
finances to be in better shape than parts of the euro zone.
"We have been in a tight range, and we will probably stay
put next week as well," a dealer in Budapest said. "There is
little upside, though, the zloty faces strong resistance at 3.96
per euro, and the euro/forint is also stuck north of 269.50."
At 1400 GMT, the Polish zloty <EURPLN=> was 1 percent
stronger, trailed by the Hungarian forint <EURHUF=>, which
gained 0.6 percent. The Czech crown <EURCZK=> added 0.4 percent
while the Romanian leu <EURRON=> was 0.2 percent firmer.
Polish bonds were slightly stronger at the longer end of the
curve, while the shorter end was relatively stable.
Poland's Finance Ministry said on Friday it would sell
another large chunk of debt in March, and possibly cover all of
the country's funding needs by the summer. []
Despite the supply pressure, Poland's success covering its
borrowing needs provided support for its debt, dealers said.
"The good condition of Poland's debt (...) translates into
favourable sentiment," said Marek Kaczor, a dealer at PKO BP in
Warsaw.
Analysts said longer-dated bonds may strengthen while
two-year yields could fall as most members of Poland's newly
appointed Monetary Policy Council (MPC) alluded to possible rate
hikes in the second half of the year.
Hungarian bonds were relatively stable compared to the
previous close, with short-end yield levels still near the
multi-year lows seen at Thursday's three-year bond auction.
[]
CHOPPY RECOVERY
Central Europe is poised for a modest, choppy recovery this
year, analysts say, with Poland the most likely outperformer.
The Polish central bank said on Friday it expects the economy to
grow by 3.1 percent in 2010 with growth easing to 2.9 percent in
2011. []
Fiscal tightening could limit growth in most countries,
however, while unemployment and bad loans have yet to peak.
On Friday, Austria's Erste bank <ERST.VI>, a prominent
lender in the region, 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 stressed the need for
further reforms.
Hungary's unemployment rate, meanwhile, rose to 10.8 percent
in November-January, its highest since 1994. []
Dealers said such uncertainty, coupled with election risks
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=> 25.935 26.027 +0.35% +1.48%
Polish zloty <EURPLN=> 3.962 4.003 +1.03% +3.58%
Hungarian forint <EURHUF=> 269.49 271.07 +0.59% +0.32%
Croatian kuna <EURHRK=> 7.269 7.264 -0.07% +0.55%
Romanian leu <EURRON=> 4.112 4.119 +0.17% +3.05%
Serbian dinar <EURRSD=> 99.529 99.557 +0.03% -3.67%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -5 basis points to +94bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +129bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +108bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +402bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +332bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +291bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +540bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +485bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +441bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1500 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/Susan Fenton)
