* Currencies, stocks down on EU deficit data, rate comments
* Intervention risk remains as strong FX impact weighed
* Hungarian, Romanian bond auctions smooth
* Election finale, cbank watched in Hungary
(Adds Czech cbanker, Polish minutes, Romania tender)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, April 22 (Reuters) - Central European
currencies dipped on Thursday after data showing a worsening
Greek budget deficit and rate cut talk in the Czech Republic and
Poland, while Hungarian and Romanian debt auctions went well.
The cost of insuring Greek debt rose again and the spread on
Greek bonds versus benchmark German Bunds widened to a fresh
12-year high after European Union data showed the country's 2009
deficit was higher than first thought. []
Central European stocks dropped into negative territory and
currencies gave up small morning gains as the data hit other
European assets and kept investors cautious.
Data for other EU countries mostly confirmed previously
reported budget deficits, though Ireland's gap was also revised
upward. []
Polish central bank minutes showing some rate-setters
believed interest rate cuts should be considered to rein in
excessive gains in the zloty caused the unit to dip to 3.8824
per euro from 3.8756 in an initial reaction. []
Central banker Vladimir Tomsik said there was room to cut
interest rates in the Czech Republic as well as a recent rise in
the crown threatened the country's inflation target and growth
prospects. []
The crown <EURCZK=> weakened to 25.415 per euro by 1328 GMT
from 25.33 before the comments were released. It traded 0.5
percent down on the day, while the zloty <EURPLN=> was down 0.4
percent and Hungary's forint <EURHUF=> was 0.5 percent lower.
The Polish central bank surprised markets on April 9 with
the first market intervention in 10 years to knock the zloty off
16-month peaks, and cooling markets since. Romania's central
bank was also suspected to have intervened and now analysts see
chances growing to see similar moves elsewhere.
"There are three main ways in which policymakers could try
to weaken the (crown)," Capital Economics said in a note,
mentioning verbal intervention, rate cuts and currency
purchases.
"The third option (is) the one that policymakers are perhaps
most likely to adopt. But while FX purchases have helped limit
previous bouts of ... appreciation, the bigger point is that
policymakers have not been able to swim against the tide of the
market for long."
SMOOTH AUCTIONS
Emerging EU assets -- backed by the region's relatively
upbeat growth outlook and lower debt loads -- have stayed mostly
immune to the problems of the debt-laden euro zone periphery,
with bond yields dropping to multi-year lows this month.
Hungary smoothly sold 55 billion forints and Romania sold
700 million lei in bonds on Thursday, following up Czech and
Polish bond tenders that saw bids twice the offer at Wednesday
auctions. [] [].
Yields at both auctions dropped from previous sales, but
Hungary's were higher than market rates on Wednesday.
"I think this is the end of the rally for now," a Budapest
bond dealer said.
Bond markets in both countries have been supported by rate
cuts this year, while Romania also got a boost from a resumption
of its IMF deal after a pause caused by a 2009 political crisis.
Romania's IMF representative said the country will likely
ask the Fund to accept a wider budget gap target next week, news
that scared investors and hit the leu <EURRON=>, which later
recovered to trade a touch lower on the day [].
Hungary is expected to cut rates by another 25 basis points
on Monday, a day after an election run-off in which the Fidesz
party was close to winning the two thirds parliamentary majority
needed to push through vital reforms. []
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.415 25.279 -0.54% +3.55%
Polish zloty <EURPLN=> 3.879 3.865 -0.36% +5.8%
Hungarian forint <EURHUF=> 265.16 263.87 -0.49% +1.96%
Croatian kuna <EURHRK=> 7.256 7.251 -0.07% +0.73%
Romanian leu <EURRON=> 4.138 4.133 -0.12% +2.4%
Serbian dinar <EURRSD=> 98.959 99.24 +0.28% -3.11%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -24 basis points to 69bps over bmk*
7-yr T-bond CZ7YT=RR +5 basis points to +66bps over bmk*
10-yr T-bond CZ10YT=RR +3 basis points to +62bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +428bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +366bps over bmk*
10-yr T-bond HU10YT=RR +6 basis points to +337bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1628 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Marius Zaharia; Editing by Toby Chopra, John Stonestreet)
