Czech markets rangebound as rates seen staying put

...of steady interest rates in the months ahead.

Vladimir Tomsik, a new member of the central bank (CNB) policy board, confirmed the widespread market view of a dovish CNB in a Reuters interview, in which he said interest rates may rise or fall in the next step in policy.

The crown shed 0.2 percent to 28.160 per euro by 1505 GMT, hugging a range of between 28.050 and 28.250.

Two-year rates on interest rate swaps -- one of the most sensitive on the market to shifts in expectations for monetary policy -- inched 2 basis points higher .

"The crown is stabilising in a narrow range ... and waiting for a new impulse, which might not come until Thursday's ECB (European Central Bank) meeting," said Jiri Skop, analyst at Komercni Banka in Prague.

In the bond market, investors were preparing for Wednesday's auction of a long-dated government bond .

The key Czech rate of 2.50 percent holds a record 100 basis points below the euro zone equivalent, so investors prefer to sell the crown for higher-yielding emerging markets assets to profit from the interest rate carry on the position.

Tomsik told Reuters inflation remained well under control and he wanted the inflation-targeting CNB to be flexible in the face of shifting market views on the crown, whose moves quickly affect inflation and output [ID:nL06588757] [ID:nL06446848].

"Clearly, Tomsik presented himself as one of the most dovish members of the central bank board and showed his dovish views are being strongly influenced by foreign exchange movements," said Daniel Kozel, portfolio manager at PPF Asset Management.

----------------- MARKET SNAPSHOT AT 1505 GMT ----------------- Crown/euro last deals at 28.160 (-0.21 pct) Crown/dollar at 21.737 bid (unchanged)

5-year yield due Oct 2010 3.29 pct bid (+3 bps) 10-year yield due Jan 2016 3.76 pct bid (-1 bps)

5-yr CZK/EUR mid yield spread -69 bps (vs -71) 10-yr CZK/EUR mid yield spread -28 bps (vs -26)

Current levels versus prior domestic close at 1500 GMT ---------------------------------------------------------------

[PRAGUE/Reuters/Finance.cz]