* Zloty up on rate comments; PLNHUF at 3-1/2 mth highs
* Yields up at Polish debt tender, two-year hit hardest
* Romania leaves rates flat, as expected
(Adds Polish tender, Reuters FX poll, quotes, details)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, Jan 5 (Reuters) - The Polish zloty jumped
to eight-week highs on Wednesday as a call for higher interest
rates from the central bank governor sent the average yield at a
bond tender some 19 basis points higher from previous sales.
Marek Belka told Reuters in an exclusive interview that it
was time for Polish interest rates to move gradually higher to
help strengthen the zloty and cap inflation expectations.
[]
His comments prompted some analysts to move forward their
forecast timing for a widely expected first hike from 3.5
percent, the record low at which Poland's 10-strong Monetary
Policy Council has kept its key interest rate for 18 months.
By 1501 GMT, the zloty <EURPLN=> was 1.3 percent stronger at
3.885, a touch off an earlier high of 3.8771. Polish bonds
weakened on Belka's comments, with yields up some 11 basis
points for two-year paper.
Another MPC member, Jan Winiecki, said later on Wednesday
the central bank could raise rates in the first quarter, adding
inflation this month will top 3.1 percent seen for December.
Like Belka, Winiecki voted against a proposed 50 basis point
rate rise in August, the last month for which individual voting
records at the central bank have been published.
Poland sold 6.24 billion zlotys in two- and five-year bonds
on Wednesday, with yields jumping from previous tenders, and the
finance ministry said it will likely scrap its 24-week T-bill
tender scheduled for January 10 [].
The forint, meanwhile, was hit by Belka's comments as market
players ditched the Hungarian unit in favour of the zloty. The
forint <EURHUF=> was 0.1 percent down versus the euro on the
day, and hit its lowest against the zloty since Sept. 20, at
71.4 <PLNHUF=R>.
"We've been fighting the Poles since these Belka comments.
Right now we're at (PLNHUF) 71, which could go higher still,"
one Budapest-based dealer said, adding the rally may sputter out
once rate hikes begin in Warsaw.
"This could be a classic case of
buy-the-rumour-sell-the-fact. There is nothing locally to
justify underperformance by the forint," he said.
Polish 3x6 forward rate agreements <PLNFRA> -- which show
where markets see rates in future -- jumped more than 10 basis
points on Wednesday and now are pricing in a rise of 54 basis
points in the next three months.
The Czech crown <EURCZK=> and Romania's leu <EURRON=> were
flat or a shade higher on the day.
All currencies are seen firming in 2011, with the zloty
leading gains and the leu lagging its peers, a Reuters poll
showed on Wednesday. The forecasts were slightly more bullish
than in a similar poll a month ago. []
ROMANIA'S RATES FLAT
Romania's central bank left interest rates unchanged at 6.25
percent -- in line with forecasts -- as high inflation kept
rate-setters cautious despite the economy lagging its regional
peers. []
In a detailed statement sent hours after the decision, it
said it was still worried about risks related to the
second-round effects from a July hike in the value added tax.
A rate cut may still be on the cards later this year when
inflation is expected to ease and as Romania moves to
consolidate market confidence in its reforms by seeking a new
deal with the International Monetary Fund.
"The NBR (central bank) could resume the monetary policy
easing cycle ... if inflationary pressures subside and Romania
reaches another agreement with the IMF in the next few months,"
Erste Group said in a note.
But as other central banks in the region move closer to
monetary tightening, analysts say it will be increasingly
difficult for Romania to change rates.
The country is expected to receive a combined tranche of
over 2 billion euros from the IMF and the European Commission
later this year, having passed all the key fiscal reforms
required by the deal late last year.
Prime Minister Emil Boc said on Wednesday Romania ran a
budget deficit of 6.6 percent of gross domestic product in 2010,
slightly less than a 6.8 percent goal agreed with the IMF.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.838 24.871 +0.13% +0.65%
Polish zloty <EURPLN=> 3.885 3.937 +1.34% +1.88%
Hungarian forint <EURHUF=> 276.29 275.96 -0.12% +0.61%
Croatian kuna <EURHRK=> 7.4 7.362 -0.51% -0.27%
Romanian leu <EURRON=> 4.269 4.27 +0.02% -0.84%
Serbian dinar <EURRSD=> 106.31 106.46 +0.14% -0.36%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -20 basis points to 85bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +87bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +99bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +11 basis points to +417bps over bmk*
5-yr T-bond PL5YT=RR +10 basis points to +388bps over bmk*
10-yr T-bond PL10YT=RR +5 basis points to +329bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -6 basis points to +653bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +592bps over bmk*
10-yr T-bond HU10YT=RR +3 basis points to +494bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1601 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz
and Marius Zaharia, Editing by Catherine Evans)
