* FX and regional stocks stronger, only crown falls slightly
* Hungary's rate decision at 1200 GMT
* Leu backed by politicians' comments on no-confidence vote
(Adds fixed income, detail)
WARSAW, Oct 25 (Reuters) - Central Europe's currencies were
mostly stronger on Monday with Hungary's forint rising more than
half a percentage point before the country's central bank meets.
Analysts said even though policymakers are expected to leave
borrowing costs flat for the sixth consecutive month, the bank's
statement accompanying the decision should be interesting given
investor concerns over fiscal policy.
Interest rates in Hungary stand now at 5.25 percent after it
had been cut for 10 months with the last cut delivered in April
and a Reuters poll of analysts showed the market expects rates
to remain at this level until the end of 2011.
"It will be particularly interesting to note whether any of
the Hungarian central bankers will put the motion to hike rates
on the grounds of disappointing fiscal plans," analysts at
Citibank Handlowy wrote in a note.
Hungary's government implemented budget cuts for the
following years as it seeks to trim the budget deficit under the
EU's required ceiling of 3 percent of GDP already next year, but
its tax plans and a move to intervene in the partially
privatised pension system have worried investors.[]
By 0838 GMT the forint <EURHUF=>, the Polish zloty <EURPLN=>
and Romania's leu <EURRON=> were each 0.6 percent up against the
common currency.
Only the Czech crown <EURCZK=> bucked the regional trend and
edged some 0.1 percent lower.
Stocks in the region were all in the black, rising some
0.1-0.9 percent, while bonds were mixed, with Hungary's papers
rising, following the forint, and Poland's virtually flat.
In Poland the central bank's Monetary Policy Council
announces its monthly rate decision on Wednesday, and the
10-strong body is expected to leave borrowing costs flat at a
record low of 3.5 percent although analysts expect the decision
to have been finely balanced.
The market widely expects the council to raise rates by a
moderate 25 basis points by the end of the year as inflation has
already jumped to the central bank's 2.5 percent target and is
predicted to accelerate further.
NO-CONFIDENCE VOTE
In Romania the leu got an additional boost from growing
expectations that the country's government would survive a
no-confidence vote on Wednesday, following politicians' comments
over the weekend.
"Those who entered long euro/leu ahead of the
(no-confidence) motion are taking stop losses," one
Bucharest-based dealer said.
Prime Minister Emil Boc's fragile, 10-month-old coalition
government is struggling to impose the tough economic medicine
agreed in exchange for an IMF-led 20 billion euro bailout as
public opposition to austerity measures rises and his party's
popularity sinks.
Boc survived a previous motion in June by a tight margin and
analysts say the latest vote could again be close, given the
coalition's small majority and the possibility of defections.
Crin Antonescu, the leader of the second-largest opposition
party, said there was a 55 percent chance that Boc's cabinet
would survive.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.548 24.525 -0.09% +7.21%
Polish zloty <EURPLN=> 3.945 3.969 +0.61% +4.03%
Hungarian forint <EURHUF=> 273.38 275.11 +0.63% -1.11%
Croatian kuna <EURHRK=> 7.331 7.334 +0.04% -0.3%
Romanian leu <EURRON=> 4.272 4.299 +0.63% -0.81%
Serbian dinar <EURRSD=> 106.4 106.36 -0.04% -9.89%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 76bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +73bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +97bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +374bps over bmk*
5-yr T-bond PL5YT=RR -6 basis points to +344bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +314bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -4 basis points to +544bps over bmk*
5-yr T-bond HU5YT=RR -8 basis points to +507bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +455bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1038 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; Editing by Ruth Pitchford)
