* Polish zloty eases, rate increase already priced in
* Czech bond yields up after data; Polish bond prices firm
* Forint stays near 11-month highs, Hungary bonds firm
* ECB comments will be in focus later in the week
(Adds new comments, prices)
By Dagmara Leszkowicz and Sandor Peto
WARSAW/BUDAPEST, April 4 (Reuters) - Poland's zloty eased
ahead of Tuesday's central bank (NBP) rate meeting, while the
forint's strength helped Hungarian bonds post further gains on
Monday.
The zloty <EURPLN=> shed a quarter of a percentage point
versus the euro by 1320 GMT to 4.029 in thin trade as markets
have already priced in an expected interest rate increase by the
country's central bank.
A Reuters poll showed 23 out of 29 analysts expect the Polish
Monetary Policy Council to raise rates by 25 basis points due to
concerns over accelerating inflation. []
"We and the market are both expecting a hike. If the Council
decides to leave rates flat, it will be negative news for the
zloty that will increase the depreciation pressure on the Polish
currency," Bank Handlowy wrote in a research note.
The bank already raised borrowing costs to 3.75 percent in
January from a record low of 3.5 percent.
Most analysts believe that nearby Hungary's central bank has
already finished its tightening which brought rates to 6 percent
by January, but optimism over the country's ongoing fiscal
reforms buoy Hungarian markets.
HUNGARIAN ASSETS STRONG
The forint traded near highs against both the zloty
<PLNHUF=R> and the euro <EURHUF=>. After hitting an 11-month
high versus the euro in early trade at 264.50, it retreated
slightly to 265.10 by 1320 GMT, levels unchanged from Friday.
"The 265 level is a resistance for the forint, if it breaks
through and closes firmer, it can head towards the next level at
263," one Budapest-based trader said.
"I don't think that a Polish rate increase would hit the
forint's relative positions as there will be elections in Poland
later this year and there is uncertainty over their fiscal
policy."
Commerzbank said in a note that the publication of March
Hungarian budget figures on Thursday could test the strength of
the country's markets as the deficit already exceeded 80 percent
of the full-year target in February.
Meanwhile, Hungarian government bonds firmed, with 5-year
yields dropping 4 basis points to 6.90 percent, a 2-month low.
One trader said the spot market firmed as some foreign
investors received 5-year interest rate swaps.
"Usually they (foreigners) build positions in 5-year bonds
if the market sentiment is good," the trader said. "The big
question mark looking ahead is the ECB's comments after an
expected rate increase there (on Thursday)."
European Central Bank rate rises from the current 1.0
percent record low would cut the yield advantage of economies in
the European Union's east wing. Investors also look at the
impacts of potential further euro zone rate rises on growth in
euro zone states which take up most of Central Europe's exports.
Elsewhere, the Czech crown <EURCZK=> was flat at 24.455 to
the euro, while the leu <EURRON=> firmed a shade to 4.13.
Czech data showed retail sales rose by 6.5 percent on an
annual basis in February, almost double the forecast of 3.9
percent. []
Czech bond yields moved higher, particularly at the long end
of the curve, after the data but dealers said the reaction to
such a strong reading was relatively subdued.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.455 24.446 -0.04% +2.23%
Polish zloty <EURPLN=> 4.029 4.019 -0.25% -1.76%
Hungarian forint <EURHUF=> 265.1 265.12 +0.01% +4.86%
Croatian kuna <EURHRK=> 7.369 7.373 +0.05% +0.15%
Romanian leu <EURRON=> 4.13 4.132 +0.05% +2.49%
Serbian dinar <EURRSD=> 102.55 102.32 -0.22% +3.29%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -3 basis points to -5bps over bmk*
7-yr T-bond CZ7YT=RR +5 basis points to +67bps over bmk*
10-yr T-bond CZ9YT=RR +6 basis points to +71bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +321bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +307bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +285bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -2 basis points to +455bps over bmk*
5-yr T-bond HU5YT=RR -3 basis points to +420bps over bmk*
10-yr T-bond HU10YT=RR -7 basis points to +374bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1520 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz;
Editing by Toby Chopra/Ruth Pitchford)
