* Investors await Czech cbank comments after rate meeting
* Romania tender watched closely after positive IMF review
* Hungary auction smooth, avg yield falls
(adds Hungary tender, quotes, details)
By Marius Zaharia
BUCHAREST, Aug 5 (Reuters) - The Czech crown weakened on
Thursday as investors waited to see if the central bank talks
down the recently strong currency after a policy meeting at
which it is expected to keep interest rates at record lows.
Investors have favoured the crown, usually seen as a safe
haven in central Europe, due to better-than-expected economic
data from the Czech Republic and its main trading partner
Germany as well as expectations for tight fiscal policy.
But policymakers have verbally intervened to weaken the
crown in the past when it has neared 25 per euro, fearing its
strength would hit exports and endanger economic recovery.
The crown has gained 4.1 percent against the euro since the
last rate meeting on June 23, sending it to a 21-month high. It
has outpaced a 1.7 percent gain for the Polish zloty in that
time, while the forint and leu have dropped about 0.5 percent.
At 0946 GMT, the crown <EURCZK=> traded 0.4 percent weaker
at 24.71 to the euro, while the Romanian leu <EURRON=> was 0.1
percent down. The Hungarian forint <EURHUF=> was up 0.4 percent
and the zloty <EURPLN=> was a touch stronger.
"It will be of particular interest whether the CNB comments
on the EUR-CZK exchange rate," Commerzbank said in a note.
"Some market participants had been surprised by the CNB's
lack of reaction to the exchange rate falling below the 25.00
mark. That does not seem to be in line with (Governor Miroslav)
Singer's dovish attitude."
The Czech central bank is expected to leave rates flat at
0.75 percent. The decision will be announced at 1100 GMT and
followed by a news conference at 1230 GMT. []
DEBT AUCTIONS
Romania's central bank left interest rates unchanged at 6.25
percent on Wednesday, after the country got the green light for
the next tranche of International Monetary Fund and EU aid.
[]
Some economists say the news bodes well for a recovery in
the leu, but the outlook remains uncertain as recent austerity
measures may deepen recession.
Romania's 3-year bond tender later in the day will be an
indicator of how investor sentiment has changed after the latest
IMF review. The finance ministry has been struggling to issue
debt at the yields it wants since early May when pressure rose
on the back of concerns over the success of its austerity drive.
It has capped yields at 7 percent at auctions, meaning it
sold less than planned or nothing at all.
"Most probably (Romania) will continue capping yields at 7
percent, even though this instrument can be picked up from the
secondary market at 7.2 percent," ING Bank said in a note.
"The recent improvement in liquidity conditions has not
affected government bonds so today is an important test for the
public debt manager's strategy of not paying more."
ING analysts said they expected an issuance size of about
half the announced 300 million lei after the previous three
tenders failed.
Hungary sold 50 billion forints worth of 12-month bills at
its auction, as planned, with the average yield dropping to 5.66
percent from 5.75 percent at the previous auction two weeks ago.
Polish and Czech debt tenders on Wednesday went smoothly
[], helped by generally improved global risk
appetite.
Yields in secondary debt markets across the region fell
slightly, with the benchmark 2019 Czech bond <CZ1002471=> yield
hovering around a record low.
"Bond prices rose (because) the zloty is strong and
yesterday's auction showed the sentiment on the market
improved," said a fixed income trader at a Warsaw bank.
"However this is not long-term investment and I think that
if something bad happens to the zloty those people will flee the
market," he added.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.728 24.626 -0.41% +6.43%
Polish zloty <EURPLN=> 3.981 3.985 +0.1% +3.09%
Hungarian forint <EURHUF=> 280 280.97 +0.35% -3.45%
Croatian kuna <EURHRK=> 7.221 7.221 0% +1.22%
Romanian leu <EURRON=> 4.254 4.251 -0.07% -0.39%
Serbian dinar <EURRSD=> 105.84 105.96 +0.11% -9.41%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 100bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +104bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +107bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +397bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +380bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +323bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +593bps over bmk*
5-yr T-bond HU5YT=RR -3 basis points to +550bps over bmk*
10-yr T-bond HU10YT=RR -6 basis points to +452bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1046 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 Hugh Lawson)
