* Zloty retreats as BGK mandate raises credibility questions
* Hungarian CPI data due April 12, Polish data due April 13
(Releads, adds yields, S&P on Poland, BGK mandate)
By Jason Hovet and Radu Marinas
PRAGUE/BUCHAREST, April 11 (Reuters) - The Czech crown and
Romanian leu strengthened on Monday after inflation data, while
the zloty retreated after S&P comments and late Friday news that
state-owned bank BGK got a mandate to intervene on bond markets.
Hungary's forint, the Polish zloty and the leu have gained
2-4 percent since the middle of March thanks to a better
economic outlook and, in the zloty's case, expectations of
rising interest rates.
By 1130 GMT, the crown <EURCZK=> was 0.1 percent up and
Romania's leu <EURRON=> edged up marginally. The forint
<EURHUF=>, after scaling 11-month highs last week, fell 0.6
percent to 265 and the zloty <EURPLN=> retreated from six-week
highs.
Markets are closely watching central banks and inflation
data due this week in the European Union's emerging East for
signs they may follow the European Central Bank's move to
tighten monetary policy last week.
Consumer prices rose less than expected in February in the
Czech Republic but domestic demand stays weak, while they surged
in Romania, strengthening arguments for both states to keep
rates flat for now despite diverging price pressures.
[]
Poland has mandated state-owned bank BGK to intervene on the
bond market to soothe potential tensions, the head of the
finance ministry's debt department said. []
"The issue now is credibility. The Ministry of Finance has
said it would receive on numerous occasions and then did not,"
Peter Attard Montalto of Nomura said in a note, referring to
interest rate swaps. "Now it says it will buy bonds but will
that actually materialise?" he asked.
CREDIBILITY WORRIES
"Perhaps it thinks opening Pandora's box by receiving rates,
buying bonds or talking about stress and IMF backstops will be
enough to contain delicate markets from a bond blow-up,"
Montalto added.
In a statement released on Monday, S&P said: "Poland's
relaxed fiscal stance has resulted in rising debt levels while
Polish law restricts the government's budgetary freedom when
debt exceeds certain thresholds."
It said the government has so far avoided structural reform.
Instead, it will divert some funds from the second, private
pension fund pillar of the scheme into the state-run
pay-as-you-go (PAYG) system.
"While this adjustment will help to reduce the government's
headline deficit and debt burden, in our view, it will not
improve the long-term sustainability of the public finances,"
said Standard & Poor's credit analyst Moritz Kraemer.
[].
Elsewhere, analysts are still counting on a first Czech
interest rate rise by the midpoint of the year, and markets have
also priced this scenario. []
Analysts have revised their earlier expectations of rate
cuts in Romania and now expect the bank to keep rates unchanged
at a record low of 6.25 percent until the end of the year.
The more hawkish rate view was supported by Monday's data
showing Romanian annual inflation accelerated to 8 percent in
March from February's 7.6 percent, above market expectations.
[]
Hungarian bonds were little changed early on Monday in a
lukewarm market that showed no firm direction.
"There isn't much worth mentioning this morning, we're back
roughly at late Friday's levels," a fixed income trader said.
"There was a rather strong buying spree late on Friday, and we
opened today at by and large those levels."
"Inflation data due out on Tuesday and especially the
convergence report at the end of the week will have a bit more
of an impact. No upside expected there either, but a negative
surprise might hit Hungary's assets," a trader said.
Stocks were mixed and central Europe's reference currency,
the euro, dipped. Commerzbank bank said rising inflation would
keep central European currencies on their strong run.
"Risk appetite for emerging markets is quite high anyway and
as a result it would be easy to find sufficient numbers of
market participants to join the rate speculation band wagon."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.407 24.435 +0.11% +2.43%
Polish zloty <EURPLN=> 3.968 3.962 -0.15% -0.25%
Hungarian forint <EURHUF=> 264.98 263.35 -0.62% +4.91%
Croatian kuna <EURHRK=> 7.363 7.344 -0.26% +0.23%
Romanian leu <EURRON=> 4.106 4.107 +0.02% +3.09%
Serbian dinar <EURRSD=> 101.11 101.34 +0.23% +4.76%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to -16bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +45bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +57bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +311bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +292bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +241bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +426bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +388bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +265bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1331 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; Editing by Ruth Pitchford)
