* Czech cbank holds fire as expected, mkts ignore decision
* Investors await Czech cbank comments after rate meeting
* Romania tender watched closely after positive IMF review
* Hungary, Czech auctions smooth, yields down
(Updates with Czech cbank decision, CEE FX poll)
By Marius Zaharia
BUCHAREST, Aug 5 (Reuters) - The Czech crown edged up
mid-session after the central bank kept interest rates at a
record low, but it remained in negative territory for the day
with traders eyeing a bank news conference for signs of concern
over its rise to 21-month highs.
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 high around 24.6
per euro. It has outpaced a 1.7 percent gain for the Polish
zloty in that time, while the forint and leu dipped.
At 1128 GMT, the crown <EURCZK=> traded 0.3 percent weaker
at 24.687 to the euro, while the Romanian leu <EURRON=> and the
Polish zloty <EURPLN=> were virtually flat.
The Hungarian forint <EURHUF=> was up 0.7 percent trading at
three-week highs after it broke through several key technical
levels in thin trade.
"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 bank's decision to leave rates at 0.75 percent will be
followed by a news conference at 1230 GMT. []
The crown has no more room to rise over a 12-month horizon,
according to a Reuters poll, which showed the zloty was seen
outperforming in that period [].
The poll also showed the fast appreciation of regional
currencies in the past few weeks was overdone and the units were
likely to retreat in the next 1-3 months.
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.
"Today is an important test for the public debt manager's
strategy of not paying more," the bank said, adding it 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.
A Czech 26-week T-bill auction also saw good demand and the
average yield dipped 3 basis points to 1.09 percent.
Polish and Czech debt tenders on Wednesday went smoothly
[], helped by better risk appetite.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.687 24.626 -0.25% +6.61%
Polish zloty <EURPLN=> 3.98 3.985 +0.13% +3.12%
Hungarian forint <EURHUF=> 279.1 280.97 +0.67% -3.14%
Croatian kuna <EURHRK=> 7.212 7.221 +0.12% +1.35%
Romanian leu <EURRON=> 4.251 4.251 0% -0.32%
Serbian dinar <EURRSD=> 105.89 105.96 +0.07% -9.45%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -6 basis points to 97bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +107bps 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 -8 basis points to +393bps over bmk*
5-yr T-bond PL5YT=RR -6 basis points to +378bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +322bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -5 basis points to +591bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +548bps over bmk*
10-yr T-bond HU10YT=RR -7 basis points to +451bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1228 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 Patrick Graham)
