* Czech cbank cuts rates to record low, crown underperforms
* Region recoups losses as core market pressures ease
* Poland's switch tender succesful despite worse sentiment
(Updates throughout))
BUDAPEST/WARSAW, Dec 16 (Reuters) - The Czech crown stayed
out of regional gains after the Czech National Bank (CNB) cut
interest rates to a new record low of 1 percent on Wednesday
despite recent swings in regional currencies.
The crown <EURCZK=> was slightly down at 26.24 versus the
euro at 1444 GMT, after the CNB announced its 25 basis point
interest rate cut. [] On Tuesday it shed 1.6
percent.
"I believe that this was the last rate cut in the current
cycle and that the first interest rate hike will not come before
mid-2010," said Radomir Jac, chief analyst at Generali PPF Asset
management in Prague.
"Still, today's decision is bit surprising when seen in
(the) context of the recently released data and growing risk
aversion in financial markets," he said. "(The) possibility of a
weaker crown was the key reason for keeping interest rates on
hold in November."
Poland's zloty <EURPLN=> gained 0.9 percent with dealers
saying the unit is the region's best performer.
"The zloty is doing better than we could expect in the
morning," said one Warsaw-based dealer. "Short covering pushed
it higher (before) but exporters plus new money are emerging,
boosting the unit."
The zloty has lost almost 3 percent since Dec. 4, when it
touched an 11-month high. In the same time Hungary's forint lost
the same, while the crown weakened 2.4 percent.
The forint <EURHUF=> was also stronger on Wednesday in
afternoon trade and dealers said the level of 275 to the euro
looked like a balanced exchange rate as it was good both for
exporters and importers.
The Polish central bank is seen keeping interest rates on
hold at its last 2009 meeting, but Hungary is expected to cut
rates next Monday. Hungary's FRAs are pricing in a 25 basis
point cut.
The data showed on Wednesday, Hungary's annual gross wages
fell by an annual 1.6 percent in October, which analysts said
supported further rate easing.[]
By contrast Poland's corporate wages grew 2.3 percent
year-on-year, while corporate employment remained flat comparing
to the previous month. []
In Romania the Constitutional Court validated President
Traian Basescu for a new five-year term, opening way for talks
to form a cabinet and release IMF aid funds.
The country reached an agreement on Wednesday about steps to
reach the 2010 budget deficit target, allowing disbursement of
the aid tranche if it passes Parliament. []
The International Monetary Fund put the Balkan state's 20
billion euro ($29 billion) loan package on hold in November due
to political turmoil.
Romania's leu <EURRON=> gained some 0.4 percent to the euro.
SWITCH SUCCESSFUL
Polish bonds were relatively unchanged, with yields falling
1 basis point at the shorter end of the curve after the finance
ministry sold 1.7 billion zlotys of bonds due 2015 at a switch
tender. []
In Hungary bonds were little changed and dealers said the
market remained fragile after the recent selloffs and ahead of
Thursday bond's auction <HUISSUE>.
"Nothing changed, the sentiment remains uncertain, negative,
although not as negative as yesterday," one currency dealer
said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.235 26.205 -0.11% +1.97%
Polish zloty <EURPLN=> 4.172 4.21 +0.91% -1.37%
Hungarian forint <EURHUF=> 276.52 278.07 +0.56% -4.69%
Croatian kuna <EURHRK=> 7.287 7.265 -0.3% +1.07%
Romanian leu <EURRON=> 4.227 4.245 +0.43% -5.03%
Serbian dinar <EURRSD=> 96.24 95.72 -0.54% -7.02%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +14 basis points to 122bps over bmk*
7-yr T-bond CZ7YT=RR -9 basis points to +89bps over bmk*
10-yr T-bond CZ10YT=RR +1 basis points to +79bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +4 basis points to +386bps over bmk*
5-yr T-bond PL5YT=RR +6 basis points to +340bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +303bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +5 basis points to +568bps over bmk*
5-yr T-bond HU5YT=RR +6 basis points to +515bps over bmk*
10-yr T-bond HU10YT=RR +3 basis points to +444bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1444 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Krisztina Than/Marton Dunai/Dagmara
Leszkowicz; Editing by Hugh Lawson and Victoria Main)
