* Forint, zloty ease in slow market
* Hungary central bank rate decision at 1200 GMT
* UK, U.S. markets closed for holiday
* Czech debt financing plans eyed
By Gergely Szakacs
BUDAPEST, May 25 (Reuters) - Hungary's forint and the Polish
zloty inched lower on Monday morning in a slow market and
dealers said they expected little action in the session as UK
and U.S. markets were closed for a bank holiday.
Hungary's central bank will announce its interest rate
decision at 1200 GMT on Monday.
Analysts polled by Reuters widely expect the bank to leave
rates on hold at 9.5 percent [] despite a deep
economic downturn, due to concerns over the forint's still
fragile stability and inflation risks.
"The forint is weakening a bit now, but it's a quiet
market," a Budapest-based currency dealer said.
"I think this level of around 280 is much more realistic
than 275-276, and there is some room for further modest easing."
The dealer said he did not expect the central bank to
surprise markets with a rate cut.
"I think they will not risk a cut," he said.
Hungary's forint <EURHUF=> was down 0.46 percent versus the
euro at 0838 GMT, with weaker-than-expected retail sales data
having no impact on the market.
Poland's zloty <EURPLN=>, the worst performer among central
European currencies this year, was also weaker on Monday and
dealers said market's activity was likely to be limited due to a
holiday in the U.S.
Dealers were watching debt markets after Czech Finance
minister Eduard Janota said on Sunday the Czech government would
have to hike borrowing this year to up to 280 billion Czech
crowns ($14.70 billion), from a previously planned 180 billion,
to cover a sharply higher budget gap widened by economic
decline.
Dealers said another main factor were comments from central
bankers that Czech rates could fall further due to uncertainty
and continued weakness in the economy [].
At the open, spreads of the 2-year Czech bond <CZ2YT=RR>
over German bunds had fallen 14 basis points to 104. The 4-year
was down 5 bps to 148 and the 8-year was down 22 basis points to
123.
Ivo Prokop, a dealer from Raiffeisenbank said he expected
trading to be subdued due to the holiday in Britain and the U.S.
"There is a holiday for the dollar and the UK today, so I
expect a summer day, nothing significant is going to happen.
(The crown) shall stay within a range of 26.650-26.700 (per
euro)," he said.
Hungary's calendar-adjusted retail sales <HURETY=ECI> fell
by an annual 3.6 percent in March after a revised 3.3 percent
drop in February [].
Other currencies in the region were a tad stronger or
unchanged.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.638 26.655 +0.06% +0.43%
Polish zloty <EURPLN=> 4.412 4.399 -0.29% -6.73%
Hungarian forint <EURHUF=> 280.89 279.7 -0.42% -6.17%
Croatian kuna <EURHRK=> 7.303 7.312 +0.12% +0.85%
Romanian leu <EURRON=> 4.171 4.172 +0.02% -3.75%
Serbian dinar <EURRSD=> 94.75 94.562 -0.2% -5.56%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -6 basis points to 149bps over bmk*
4-yr T-bond CZ4YT=RR -3 basis points to +180bps over bmk*
8-yr T-bond CZ8YT=RR -9 basis points to +265bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -8 basis points to +422bps over bmk*
5-yr T-bond PL5YT=RR -8 basis points to +320bps over bmk*
10-yr T-bond PL10YT=RR -6 basis points to +272bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -33 basis points to +819bps over bmk*
5-yr T-bond HU5YT=RR -66 basis points to +756bps over bmk*
10-yr T-bond HU10YT=RR -52 basis points to +629bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1039 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus, writing by Gergely Szakacs,
editing by Victoria Main and Andy Bruce)
