* Czech central bank keeps rates on hold, crown eases
* Forint, Hungary bonds surge on auction, USD bond issue
* S&P affirms Hungary's debt rating, keeps negative outlook
(Adds new comments, prices)
WARSAW/BUDAPEST, March 24 (Reuters) - The crown fell after
the Czech central bank kept interest rates on hold as expected
on Wednesday, while Hungarian assets surged after the country
finished the road show of a dollar bond.
The Czech central bank said five of its rate setters voted
for keeping rates on hold, while one board member wanted a 25
basis point hike. []
It is expected to raise its record low two-week repo rate of
0.75 percent later this year. Poland's central bank is also seen
raising its rates further, while Hungary's central bank has
probably finished its own tightening cycle. []
Before the rate decision, Czech forward rate agreements
priced in a full 25 basis point hike only by July <CZKFRA>. The
bank's February forecast implies higher rates as of the end of
the year.
The Czech crown <EURCZK=> fell after the rate decision and
was bid at 24.501 against the euro at 1348 GMT, weaker by 0.4
percent from Tuesday.
Hungary's forint <EURHUF=>, meanwhile, surged 0.8 percent to
266.90, slightly off 10-month highs hit earlier in the day at
266.10. The Polish zloty <EURPLN=> was firmer by 0.4 percent at
4.018 and the leu <EURRON=> gained 0.2 percent to 4.098.
Hungary finished the road show of a planned U.S. dollar bond
issue late on Wednesday. Market optimism over the country's
fiscal reforms and possible buying by the lead managers of the
bond issue lifted Hungarian assets, dealers said.
The government sold bonds worth 88 billion forints at its
auctions and a top-up sale, twice the amount planned, with
yields falling to 7-week lows. []
Standard & Poor's affirmed Hungary's BBB- credit rating
after the auction, while it kept its negative outlook unchanged.
Analysts' and dealers said markets were upbeat over Hungary,
but the government would have to pay a premium on its upcoming
10- and 30-year dollar-denominated bonds due to the shaky global
market environment.
Some traders warned that the hunger for yield which buoy
Hungarian assets may prove fragile, while rapidly accumulating
long positions in the country's bonds and the forint may limit
gains already in the short term.
"The 267.50 level (against the euro) looks to be a quite
strong resistance, if it breaks, the forint can easily firm to
265," one Budapest-based currency dealer said.
"But I can imagine that after the dollar bond issue occurs,
investors will start to reverse positions."
While Hungary's central bank has likely ended its own rate
tightening, Poland's forward rate agreements <PLNFRA> currently
indicate a rise of 14 basis points over the next month, which
means about a 60 percent chance of a rate hike.
The Polish central bank's Monetary Policy Council (MPC)
began a tightening cycle in January with a moderate rate
increase of 25 basis points and is expected to deliver another
quarter percentage point increase in April.
Romania's leu is expected to appreciate further, with a
target seen at around 4.0 against the euro, dealers said.
Romania sold 412 million lei ($141 million) in 10-year
treasury bonds with the average accepted yield at 7.4 percent,
up from 7.35 percent at a previous tender on Feb. 17.
"The tender results show debt managers are willing to pay
higher yields for longer term paper when the market asks for
it," said Vlad Muscalu, an economist at ING Bank in Bucharest.
"Such willingness suggests they are also concerned about
inflation and higher interest rates."
Stocks mostly firmed across Central Europe, led by the
Budapest bourse <>, which rose 1.6 percent by 1411 GMT.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.501 24.394 -0.44% +2.04%
Polish zloty <EURPLN=> 4.018 4.032 +0.35% -1.49%
Hungarian forint <EURHUF=> 266.9 269.01 +0.79% +4.15%
Croatian kuna <EURHRK=> 7.385 7.38 -0.07% -0.07%
Romanian leu <EURRON=> 4.098 4.106 +0.2% +3.29%
Serbian dinar <EURRSD=> 103.65 103.317 -0.32% +2.2%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to 9bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +66bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +69bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -10 basis points to +477bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +449bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +398bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1448 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Sam Cage and Reuters bureaus; editing by Stephen
Nisbet and Toby Chopra)
