* Fx ease, CDSs up as stock markets fall, bonds mixed
* Forint leads losses amid rate cut expectations
* Czech crown firms on PLN/CZK cross-trade
(Adds new comments, prices, bonds)
By Sandor Peto
BUDAPEST, Aug 19 (Reuters) - Central European currencies
eased on Wednesday as risk aversion rose again in global
markets, while investors in the recession-ridden region pondered
the likely pace of further monetary easing.
The Czech crown <EURCZK=>, often regarded as a safe haven
trade within the region, bucked the trend and firmed, helped by
buying against the Polish zloty <EURPLN=>, dealers said.
The forint <EURHUF=> led losses, shedding half a percent
against the euro to 273.71 by 0920 GMT, as the Hungarian central
bank <NBH) is expected to cut interest rates again on Monday,
after a long weekend starting on Thursday. []
"A rate cut is good for bonds, but at the same time it
erodes the forint's yield advantage and cuts too deep could even
hurt markets," one Budapest-based currency dealer said.
Hungarian government bond yields shed 5-10 basis points in a
thin market for medium- and long-maturity papers, while Polish
bonds eased slightly in line with the regional trend.
The zloty <EURPLN=> and Romania's leu <EURRON=> both eased
0.2 percent against the euro.
Five-year credit default swap (CDS) spreads -- a rough
equivalent to default insurance against a country's debt --
rebounded, with Poland's spread rising slightly to 137.4 from
Tuesday's 134 and Hungary's to 264.4 from 258.9.
"We're still closely watching Asian stock exchanges and
these are falling," a foreign currency dealer at Bank Pekao SA
said, adding that the dollar's firming against the euro also
indicated weakening tolerance to risk.
The crown, however, gained 0.2 percent, even though Air
France-KLM <AIRF.PA>, Europe's biggest air carrier, pulled out
of the bidding for state-owned Czech Airlines. []
"Closing of PLN/CZK positions is resulting in people selling
euros for crowns, pushing the crown stronger," a dealer said.
European stocks eased. Hungary's BUX equity index <> and
Poland's WIG20 <> each shed around half a percent, while
Prague's PX <> lost about 1.5 percent.
The region's assets remain heavily reliant on global market
sentiment changes which in the past few days caused some falls
after strong rises from lows hit early this year. Investors are
watching for signs of the beginning of a global recovery while
in Central Europe, domestic demand, the pace of interest rate
cuts and a rise in budget deficits are key local factors.
CENTRAL BANKS WATCHED
The annual growth of Hungarian gross wages slowed to 1.1
percent in June from 2.9 percent in May, indicating that
domestic demand would remain sluggish. []
Poland, which has a bigger internal market than other states
in the region and has avoided recession unlike its neighbours,
said earlier this week that corporate wages rose 3.9 percent in
July, well above analysts' expectation for a 2.1 percent rise.
Global risk-taking trends have usually overshadowed domestic
figures in the past months, but Poland's July industrial output
data, to be released later on Wednesday, may move markets,
Danske Bank said in its daily note on the region.
Weaker than expected data could trigger speculation about
further central bank rate cuts, it said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.65 25.709 +0.23% +4.3%
Polish zloty <EURPLN=> 4.177 4.169 -0.19% -1.48%
Hungarian forint <EURHUF=> 273.71 272.35 -0.5% -3.71%
Croatian kuna <EURHRK=> 7.314 7.308 -0.08% +0.7%
Romanian leu <EURRON=> 4.223 4.213 -0.24% -4.94%
Serbian dinar <EURRSD=> 93.18 93.377 +0.21% -3.97%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -35 basis points to 66bps over bmk*
4-yr T-bond CZ4YT=RR +1 basis points to +153bps over bmk*
8-yr T-bond CZ8YT=RR +19 basis points to +267bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +368bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +319bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +285bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -21 basis points to +680bps over bmk*
5-yr T-bond HU5YT=RR -56 basis points to +608bps over bmk*
10-yr T-bond HU10YT=RR -45 basis points to +528bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1120 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux, writing by Marius Zaharia,
editing by Stephen Nisbet)
