* Zloty rebounds but still under pressure
* Polish c.bank still has easing bias
* Czech bond auction well bid
* Leu weakened by political tensions
(Adds Polish c.bank post-meeting comments)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, Sept 30 (Reuters) - The Polish zloty
rebounded from early lows on Wednesday, helped by rising stocks,
but remained under pressure from concerns over mounting debt,
and dovish central bank comments after it left rates unchanged.
The Polish central bank kept interest rates at a record low
of 3.5 percent on Wednesday, in line with expectations and
following 50 basis points cuts in Hungary and Romania earlier
this week [].
The Czech crown <EURCZK=>, seen as a safer haven in the
region, edged down to 25.2 per euro. Central European stocks
jumped 1-2 percent, following western peers up.
The Polish central bank decision did not move the currency
or bonds. However, post-meeting comments that the bank was
keeping its easing bias [] may weigh on the zloty,
analysts said.
"We had flagged the possibility of a change of the informal
bias to neutral from easing, but this did not happen," said
Anders Svendsen of Nordea. "Today's meeting was slightly more
dovish than expected and hence slightly PLN negative."
The zloty <EURPLN=> was flat bid at 4.235 to the euro at
1343 GMT, but traded at its lowest since Sept 14 at 4.2475 early
in the session, extending losses after Tuesday's 1 percent drop.
On Tuesday, the Polish central bank said in a report that
the country's debt could top the constitutional cap of 55
percent of gross domestic product next year, which would trigger
public spending cuts. []
"The zloty is looking vulnerable," said a central European
currency dealer in Stockholm. "The debt story is the key driver
for people to get off the zloty at the moment."
The zloty has not traded weaker than 4.25 to the euro since
July, and dealers said a break above this level would trigger
more selling as some positions are overstretched.
The Polish economy is the only one in central Europe to
avoid recession, and the better economic fundamentals have led
strategists to pick the zloty as an outperformer. []
CZECH BONDS DEMAND HIGH
Czech bonds were little changed after a well-bid auction in
which the finance ministry sold 242 million euros of 6-year
floating rate bonds <CZ045351157=> in the first competitive
round of bidding. [].
Polish bonds also failed to react to government plans to
issue less debt in the fourth quarter [] as
officials have teased the market before with this information.
In Hungary, the forint <EURHUF=> was 0.3 percent up, but
ignored better-than-expected current account data earlier in the
session. []
Romania's leu <EURRON=> fell to 4.21 to the euro, weighed
down by uncertainty over the future of the nine-month old
governing coalition, although dealers said the central bank has
intervened to add support over the past week. []
Romanian Prime Minister Emil Boc nominated an interim
interior minister from his centrist party on Tuesday,
heightening tensions within his fragile ruling coalition.
Governments in the region have battled with rising public
deficits, which analysts said will weigh on economic recovery in
the region, although they agree the worst has passed.
On Tuesday, Moody's analysts told a Reuters investment
summit in Vienna that there is little chance of rises in eastern
European countries' debt ratings in the next few years given
recent fiscal expansion and worsening growth prospects.
* For more stories from the Reuters Central Europe Investment
Summit, please see [].
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.2 25.165 -0.14% +6.16%
Polish zloty <EURPLN=> 4.235 4.236 +0.02% -2.83%
Hungarian forint <EURHUF=> 269.45 270.25 +0.3% -2.19%
Croatian kuna <EURHRK=> 7.26 7.278 +0.25% +1.45%
Romanian leu <EURRON=> 4.21 4.187 -0.55% -4.65%
Serbian dinar <EURRSD=> 92.96 92.92 -0.04% -3.74%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -6 basis points to 156bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +181bps over bmk*
10-yr T-bond CZ10YT=RR -2 basis points to +178bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +381bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +331bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +294bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +544bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +503bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +447bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1643 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 Stephen Nisbet)
