* Czech cbank cuts rates to record low, crown underperforms
* Region recoups losses as core market pressures ease
* Romania agrees with IMF on 2010 budget
(Adds Czech rate decision, updates prices)
BUDAPEST, Dec 16 (Reuters) - The Czech crown stayed out of
regional gains after the Czech National Bank (CNB) cut interest
rates to a new record low of 1 percent on Wednesday despite
recent swings in regional currencies.
The Hungarian forint <EURHUF=> added 0.74 percent versus the
euro and the Polish zloty <EURPLN=> followed with gains of 0.6
percent after steep losses earlier in the week.
The crown was flat at 26.21 versus the euro at 1134 GMT,
rebounding from a dip to 26.275 after the CNB announced its 25
basis point interest rate cut. [] On Tuesday it
shed 1.6 percent.
"I believe that this was the last rate cut in current cycle
and that first interest rate hike will not come before
mid-2010," said Radomir Jac, chief analyst at Generali PPF Asset
management in Prague.
"Still, today's decision is bit surprising when seen in (the)
context of recently released data and growing risk aversion in
financial markets," he said. "(The) possibility of a weaker
crown was the key reason for keeping interest rates on hold in
November."
Investors are closing positions ahead of the year-end which
some dealers said contributed to Monday's sharp weakening,
although it has petered out somewhat, allowing for a mild
correction, dealers said.
"There is a critical level (support) for the forint at 279,
but I think today we will see a slight positive correction, to
maximum 276."
The Polish central bank is seen keeping interest rates on
hold at its last 2009 meeting, but Hungary was predicted to cut
rates next Monday.
Hungary's annual gross wages fell by an annual 1.6 percent
in October, data showed on Wednesday, which analysts said
supported further rate easing. []
The Romanian leu was 0.2 percent stronger on Wednesday, with
the market keenly watching potential news on a governing
coalition agreement later this week.
The Constitutional Court on Wednesday validated President
Traian Basescu for a new five-year term, opening way for talks
to form a cabinet and release IMF aid funds.
The country reached an agreement on Wednesday about steps to
reach the 2010 budget deficit target, allowing disbursement of
the aid tranche if it passes Parliament. []
The International Monetary Fund put the Balkan state's 20
billion euro ($29 billion) loan package on hold in November due
to political turmoil.
BONDS MIXED
Bond markets were mixed in the region, with yields mostly
higher across the curve by a few points.
"(Polish) bonds are weaker because the zloty topped 4.20 to
the euro (on Tuesday), worsening sentiment on the market," said
one Warsaw-based dealer. "Plus we have a switch tender, and this
does not help Polish papers."
Poland's finance ministry offers PS0415 bonds maturing in
2015 in exchange for papers due 2010 at Wednesday switch.
Hungary's market is active mostly on the short ends, a
dealer in Budapest added, but the flows are both ways and yields
are hovering a hair above Tuesday's close.
"We cannot fall during Christmas, I always say that," a
dealer said. "Investors don't want to sell and cannot buy,
typically."
"For supply, we have two more auctions coming, one on
Thursday, and one on Dec. 31," he added. "That's about it for
this year."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.21 26.205 -0.02% +2.07%
Polish zloty <EURPLN=> 4.185 4.21 +0.6% -1.67%
Hungarian forint <EURHUF=> 276.03 278.07 +0.74% -4.52%
Croatian kuna <EURHRK=> 7.283 7.265 -0.25% +1.13%
Romanian leu <EURRON=> 4.236 4.245 +0.21% -5.23%
Serbian dinar <EURRSD=> 96.36 95.72 -0.66% -7.14%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -30 basis points to 79bps over bmk*
7-yr T-bond CZ7YT=RR -13 basis points to +85bps over bmk*
10-yr T-bond CZ10YT=RR -3 basis points to +75bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +385bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +337bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +299bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +564bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +509bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +439bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1234 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
(Reporting by Krisztina Than and Marton Dunai; Editing by Hugh
Lawson and Victoria Main)
