* FX rise across the board, stocks also up
* Market digests surprise hold in Czech rates, Polish cut
* Hungarian bond yields dip below 10 pct
* Hungary raises offered amount at bond sales
(Adds bonds, new comments, updates prices)
By Gergely Szakacs
BUDAPEST, June 26 (Reuters) - A rise in global risk appetite
drove Central European currencies higher on Friday, with the
Czech crown and the Polish zloty gaining after a week that has
eased expectations for the scale of further interest rate cuts.
The zloty and crown, as well as Hungary's forint and the
Romanian leu all gained about 0.3 percent at 0828 GMT, trimming
earlier gains of as much as half a percent.
The crown edged below 26 to the euro, one day after the
Czech central bank surprised markets by leaving interest rates
on hold at an all-time low of 1.5 percent.
Markets had expected a quarter point cut. []
The central bank underlined that it looked like the Czech
economy may be past the worst of the economic downturn, and
stocks across the region also benefited from the improved global
mood, with Budapest, Prague and Warsaw up by up to 1.6 percent.
"If this good sentiment will also be present on the European
stock exchanges and the dollar will continue to lose then there
is a chance the zloty will gain to below 4.45," said Adam
Antoniak, senior economist at BPH Bank in Warsaw.
"If the zloty ends the week below 4.50 per euro then this
would bode well for the next week."
All of the region's central banks have been cutting interest
rates steadily, looking to bolster economies suffering from a
slowdown in the euro zone, but also keeping one eye on their
weakened currencies.
Hungary last cut rates in January is expected to cut rates
further as long as the forint continues to stabilise, after it
was forced into the arms of the IMF late last year.
But markets are increasingly convinced the Czechs, and
possibly the Poles are nearing the end of their easing cycles.
Short-term forward interest rates have both corrected upward
in the aftermath of this week's central bank meetings, where the
Czechs surprised by staying on hold, while the Poles cut but
policymakers signalled the room for further easing is closing.
"It seems like they (the Czechs) have reached the end of a
rate cutting cycle," said Ulrich Leuchtmann, head of foreign
exchange research at Commerzbank in Frankfurt.
CARRY
Hungary's central bank held its benchmark lending rate at
9.5 percent on Monday some dealers said that made it an
attractive carry trade in comparison with other countries in the
region. Polish rates are at 3.5 percent, Czech rate at 1.5 pct.
Hungarian government bonds also capitalised on better risk
appetite with yields dipping below 10 percent across the curve
and dealers said further falls were on the cards.
"Yields are down about 10-15 basis points, the bull is here,
we are headed down, I think we may have room for another 20
basis points, although a correction may come next week," a
Budapest-based fixed income dealer said.
"It is entirely due to the better global mood, a rally in
stocks spills over into the FX market which then boosts the bond
market."
Earlier on Friday, the Deputy Chief Executive of state debt
agency AKK told business daily Vilaggazdasag Hungary decided to
to raise offered amounts at bond tenders after the successful
auctions of the past weeks. []
For next week's auctions <HUISSUE> the AKK raised planned
issuance to 10 billion forints in the three-year segment and
seven billion in the five- and 10-year segments respectively,
from five billion forints offered so far in each series.
"I think this market could absorb even more, the amounts
offered thus far were ridiculous, but on the other hand the
caution from the side of the AKK is understandable," the bond
trader said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.939 26.04 +0.39% +3.14%
Polish zloty <EURPLN=> 4.497 4.512 +0.33% -8.49%
Hungarian forint <EURHUF=> 275.98 276.9 +0.33% -4.5%
Croatian kuna <EURHRK=> 7.285 7.305 +0.27% +1.1%
Romanian leu <EURRON=> 4.208 4.224 +0.38% -4.6%
Serbian dinar <EURRSD=> 93.72 94.042 +0.34% -4.52%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +37 basis points to 159bps over bmk*
4-yr T-bond CZ4YT=RR +1 basis points to +178bps over bmk*
8-yr T-bond CZ8YT=RR +10 basis points to +299bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -28 basis points to +815bps over bmk*
5-yr T-bond HU5YT=RR -58 basis points to +738bps over bmk*
10-yr T-bond HU10YT=RR -49 basis points to +655bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1028 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaux, writing by Marton Dunai, editing
by Patrick Graham)
