* Markets stabilise after shock of Czech election delay
* Czech, Polish bond auctions eyed, demand may be muted
* Risk appetite wanes on core markets, easing bias seen
(Adds bonds, updates markets, writes through)
By Marton Dunai and Krisztina Than
BUDAPEST, Sept 2 (Reuters) - Central European currencies
weakened on Wednesday after an overnight slide as markets
digested Czech political concerns and global risk aversion
weighed on emerging Europe's assets.
The crown was hit by a court ruling on Tuesday that threw
early Czech elections into doubt [] and dealers said
political developments would be watched closely by markets along
with a key bond auction.
The crown was down 0.4 percent versus the euro at 0929 GMT
while the Polish zloty <EURPLN=> fell 0.6 percent. The forint
<EURHUF=> was also 0.6 percent lower.
"We are in a stabilisation phase and the market is awaiting
further news. And the situation in Czech politics is not very
clear," said Murat Toprak, a strategist with Societe Generale in
London. "Risk aversion has risen and markets are much more
cautious."
U.S. and Asian stocks slid overnight and European markets,
in the red on Wednesday, signalled less appetite for risk.
After big slides overnight, dealers said they saw ranges at
weaker levels and with a bias toward further easing.
"The correction could push the zloty to 4.21-4.23 in the
coming session," a Warsaw dealer said, while an ING Bank analyst
put the next resistance level for the zloty at around 4.25.
The zloty was trading around 4.18 to the euro, the forint at
276.
"Today's (forint) range should be 275-278... the question is
how serious this worsening in sentiment will be, and what size
of a negative correction it will trigger," a dealer in Budapest
said.
Hungary is seeking a possible extension of the access period
of its IMF/EU loan to have a safety buffer next year while it
increasingly returns to market financing, Finance Minister Peter
Oszko told Reuters late on Tuesday. []
BONDS EASE
Czech dealers said a 10-year bond <CZ1002471=> auction, to
close around 1000 GMT, would be key to gauge investor sentiment
as the political turmoil looked set to delay talks on the 2010
budget, which is already seen spiralling past 7 percent of GDP.
"We (will) see what demand appears," a fixed income dealer
said. "The budget worries and political troubles can put
pressure on the bond market."
Czech bond yields were a touch higher ahead of the auction,
and dealers said the reaction to political developments so far
has been muted. Polish and Hungarian bond yields also rose in
thin trading, dealers said.
Polish bonds added 2-3 basis points across the curve,
mirroring the weakening zloty and stocks ahead of a two-year
bonds tender, also due at 1000 GMT.
"Demand on the tender may be poor," said Piotr Zoltowski,
dealer at BPH bank in Warsaw.
Two-year yields have risen in the last two weeks on the back
of the growing expectations the central bank's Monetary Policy
Council easing cycle has ended due to stubbornly high inflation
and improving economic outlook.
A German incentive that subsidised scrapping old cars and
buying new ones ran out on Wednesday and its impact on the
region's industries and the economic recovery would still need
to be assessed [].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.729 25.629 -0.39% +3.98%
Polish zloty <EURPLN=> 4.179 4.155 -0.57% -1.53%
Hungarian forint <EURHUF=> 276.11 274.35 -0.64% -4.55%
Croatian kuna <EURHRK=> 7.342 7.343 +0.01% +0.31%
Romanian leu <EURRON=> 4.236 4.227 -0.21% -5.23%
Serbian dinar <EURRSD=> 93.151 92.97 -0.19% -3.94%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to +146bps over bmk*
4-yr T-bond CZ4YT=RR +2 basis points to +170bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +394bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +330bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +288bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -22 basis points to +653bps over bmk*
5-yr T-bond HU5YT=RR -59 basis points to +595bps over bmk*
10-yr T-bond HU10YT=RR -47 basis points to +502bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1129 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Krisztina Than, editing by Mike Peacock)
