* Czech cbank holds rates as expected, crown steady
* Markets watch Romania court ruling on austerity package
* Polish bonds ease on rate hike concerns
* FX mixed; zloty, forint hit by U.S. data
(Updates throughout)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, June 23 (Reuters) - The crown shook off a
drop in risk appetite on Wednesday as the Czech central bank
left rates unchanged, while investors readied for a key court
ruling on Romania's IMF-agreed austerity package on Thursday.
Central European markets have been rattled recently by
growing worries over the region's ability to rein in budget
deficits, with governments expected to face one hurdle after
another in cutting spending.
Investors, with less appetite for risk on Wednesday due to
poor U.S. data, turned their eyes to a ruling due on Thursday
from Romania's constitutional court over the government's
planned public sector pay cuts, key to the country's IMF deal.
If the court rejects the cuts, the IMF deal derails,
increasing financing risks and likely inflicting significant
damage on the leu, although the central bank is seen intervening
in the market to tame the pace of its weakening.
Most analysts expect the cuts to pass, but the court has a
history of overturning reform packages, making it more difficult
for the government to keep public spending in check.
"Naturally, there are some concerns about the ruling," said
one trader in Bucharest.
At 1403 GMT, the leu <EURRON=> was steady in thin trade.
Hungary's forint <EURHUF=> and Poland's zloty <EURPLN=> were
0.8-0.9 percent down.
The crown <EURCZK=> traded 0.2 percent up on the day,
holding below the 25.8 per euro psychological level, which
dealers see providing strong resistance against any weakening.
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. []
Governor Zdenek Tuma, in his final meeting before leaving
his post this month, told reporters that it was hard to predict
the next move in rates but that stability was likely in the
nearest period. []
POLISH YIELDS UP
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. []
Stocks in the region were also in the red on Wednesday, with
Czech power producer CEZ <> falling 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 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.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.693 25.745 +0.2% +2.43%
Polish zloty <EURPLN=> 4.079 4.048 -0.76% +0.61%
Hungarian forint <EURHUF=> 281.15 278.76 -0.85% -3.84%
Croatian kuna <EURHRK=> 7.197 7.197 0% +1.56%
Romanian leu <EURRON=> 4.225 4.224 -0.02% +0.29%
Serbian dinar <EURRSD=> 104.02 103.5 -0.5% -7.83%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -10 basis points to 146bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +159bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +156bps 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 +2 basis points to +619bps over bmk*
5-yr T-bond HU5YT=RR +18 basis points to +574bps over bmk*
10-yr T-bond HU10YT=RR +12 basis points to +497bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1703 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 Ron Askew/Ruth Pitchford)
