* Czech cbank holds rates as expected, crown steady
* Polish bonds ease on rate hike concerns
(Updates with Czech rate decision)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, June 23 (Reuters) - The crown was steady
on Wednesday as the Czech central bank left interest rates
unchanged, while other central European currencies slipped as
recent risk appetite faded.
The Czech central bank left its benchmark rate on hold at an
all-time low of 0.75 percent as expected and most analysts
expect the first hike in the first part of 2011. []
Positive expectations for fiscal discipline following a
centre-right win election win is also expected to be a factor in
keeping interest rates low.
"Since the last ... meeting, a string of data has developed
in a pro-inflationary direction in relation to the central
bank's assumptions," said Raiffeisen Bank analyst Michal Brozka.
"On the other hand, chances for fiscal austerity have risen,
which is an argument to keep rates low for a longer period."
The crown <EURCZK=> traded 0.1 percent up on the day at 1141
GMT, holding below the 25.8 per euro psychological level, which
dealers see providing strong resistance against any weakening.
But the Hungarian forint <EURHUF=> and the Polish zloty
<EURPLN=> were 0.4-0.5 percent weaker as poor U.S. housing data
added fuel to fears about the global economic recovery.
Poland's central bank is also expected to leave interest
rates unchanged at a record low next Wednesday, but expectations
for a bigger rate hike by the end of 2010 lifted bond yields to
near their highest levels since the start of June.
"Bond yields rose some 4 basis points on Tuesday, and
central banker comments on a possible rate hike added fuel to
the rises," said Marek Kaczor, a dealer at PKO BP.
A member of the central bank's Monetary Policy Council, Anna
Zielinska-Glebocka, told Reuters in an interview that Poland
should raise rates by 50 basis points in one move in the autumn
from 3.5 percent. []
CONCERNS PERSIST
Romania's leu <EURRON=> was a touch stronger against the
euro a day ahead of an expected court ruling on austerity
measures, a key factor for securing the country's IMF-led 20
billion euro aid package.
Analysts expect the cuts to pass, but the Constitutional
Court has a history of overturning reform packages, making it
more difficult for government to keep public spending in check.
"Naturally, there are some concerns about the ruling," said
one trader in Bucharest.
Stocks in the region were also in the red on Wednesday, with
Prague's bourse <> leading losses, dragged down by Czech
power producer CEZ <> which fell to two-week lows after
trading for the first day without dividend rights.
CEZ plans its second eurobond this year with a maximum 500
million euros offer in 10-year bonds. In April, the largest
listed firm in central Europe placed a 15-year, 740 million euro
bond priced at 122 basis points above mid-swaps. []
Finance Minister Eduard Janota said after the first CEZ
issue this year that it set a minimum price benchmark for the
state's planned eurobond. Czech Republic delayed a eurobond
issue in April due to debt market volatility.
Regional markets have been under pressure in the past months
from worries of possible contagion from euro zone's debt crisis.
However, the region is far from facing the same financing
pressure and its currencies are seen firming this year.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.716 25.745 +0.11% +2.34%
Polish zloty <EURPLN=> 4.066 4.048 -0.44% +0.93%
Hungarian forint <EURHUF=> 280.1 278.76 -0.48% -3.48%
Croatian kuna <EURHRK=> 7.197 7.197 0% +1.56%
Romanian leu <EURRON=> 4.221 4.224 +0.07% +0.39%
Serbian dinar <EURRSD=> 103.55 103.5 -0.05% -7.41%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -8 basis points to 148bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +162bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +154bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +417bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +385bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +318bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +5 basis points to +623bps over bmk*
5-yr T-bond HU5YT=RR -10 basis points to +566bps over bmk*
10-yr T-bond HU10YT=RR +5 basis points to +490bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1441 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz;
and Marius Zaharia, Editing by Stephen Nisbet/Toby Chopra)
