* Currencies little changed, but Ireland closely watched
* Polish rate hike bets fade, but ENEA talks could help PLN
* Polish bonds reverse Tuesday gains due to Irish woes
(Updates with fixed income, quotes)
By Marius Zaharia
BUCHAREST, Nov 17 (Reuters) - Polish bonds lost most of
their previous session's gains ahead of a 10-year debt auction
on Wednesday, as jitters related to the Irish debt crisis kept
foreign investors on the sidelines.
Polish yields rose by up to 6 basis points in the first part
of the session, erasing most of the impact of fading rate hike
expectations triggered by a central bank hawk switching to a
more neutral stance on Tuesday [].
"The results of today's 10Y auction depend on the
participation of foreign investors," ING Bank said in a note.
"So far we have seen no important flow of foreign funds to
the fixed-income market since the peripheral euro zone problems
returned to the headlines."
It said the 1.5-3.0 billion zloty tender due at 1100 GMT
could see low volumes due to the Irish woes, but central banker
Andrzej Bratkowski's comments that currency strength has offset
the need to hike rates immediately could prevent yields rising.
Bond auctions in Budapest and Bucharest on Thursday will
also be a test of investor sentiment towards the region.
Hungarian bonds were broadly steady in low turnover, but
dealers warned that local markets, left without an International
Monetary Fund safety net and puzzled by an ambitious 2011 budget
deficit goal based on unorthodox measures, remained vulnerable
to shifts in global risk appetite.
Central European currencies opened a touch stronger, taking
a breather after losses of about half-a-percent in the previous
session, but dealers said that with no immediate solution in
sight for Ireland, markets remained in a weakening bias.
While euro zone finance ministers have agreed to lay the
groundwork for bailing out Ireland's banking sector with the
International Monetary Fund, Dublin has yet to decide whether to
request the aid [].
Irish Finance Minister Brian Lenihan said intensive talks
with European Union, IMF and European Central Bank officials
would begin on Thursday [].
NOT AS BAD AS LAST TIME
Ireland's debt woes have hurt central European assets over
the past few sessions, but to a lesser extent than during the
Greek crisis in April-May, when spillover risk was clearer due
to Greek banking exposure in the region.
Despite lower debt levels, some investors place emerging
Europe's assets in a similar risk category with euro zone
peripherals, due to high fiscal imbalances and a slow policy
response to them.
At 1016 GMT, the Polish zloty <EURPLN=> was 0.3 percent
higher, while the Hungarian forint <EURHUF=> and the Czech crown
<EURCZK=> were both up 0.1 percent. The Romanian leu <EURRON=>
was flat.
A Budapest-based dealer said the forint could fall to 280
per euro, its lowest since Sept. 24, if Irish woes weaken it
past October's low of 278.30.
"Normally we see strong upside reaction in Emerging Europe
crosses versus the EUR," said Simon Quijano-Evans of Cheuvreux.
"However, this time around it is more of a euro
zone-specific issue, as reflected in the relatively subdued
reaction of EME (emerging Europe's) currencies to the latest
downside action in EUR/USD."
BNP Paribas said a reopening of talks on the sale of utility
Enea <ENAE.WA> with at least one more bidder alongside the
country's richest man, Jan Kulczyk, reignited expectations of
hard currency inflows. [] That could help the zloty
on Wednesday and support its long PLNHUF position.
Czech markets were closed for a national holiday.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.586 24.616 +0.12% +7.04%
Polish zloty <EURPLN=> 3.948 3.961 +0.33% +3.95%
Hungarian forint <EURHUF=> 277.45 277.8 +0.13% -2.56%
Croatian kuna <EURHRK=> 7.387 7.388 +0.01% -1.05%
Romanian leu <EURRON=> 4.294 4.295 +0.02% -1.32%
Serbian dinar <EURRSD=> 106.76 106.83 +0.07% -10.19%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 75bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +71bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +95bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +7 basis points to +373bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +358bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +315bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +6 basis points to +583bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +545bps over bmk*
10-yr T-bond HU10YT=RR -3 basis points to +465bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1116 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 Catherine Evans)
