* Forint gains, Polish zloty lower in quiet trade
* Hungary lifts bond sale at auction, yields fall
By Marton Dunai and Krisztina Than
BUDAPEST, Jan 27 (Reuters) - Hungary drew strong demand at
bond auctions on Thursday and yields fell on optimism about
fiscal reforms promised by the government for next month, while
currencies across the region were mixed in quiet trade.
Hungary sold bonds across three maturities at auctions
<HUISSUE> <HUAUCTION02> and the offers attracted firm demand
following a recent rally which drove yields to near nine-week
lows on the secondary market.
Investors are hopeful that the government will present
fiscal reforms next month that will enable the deficit to remain
low beyond 2012 when Hungary's big one-off taxes on businesses
expire.
"The auction was excellent," a trader in Budapest said.
"Even though yields have come down 85 basis points within
two weeks, foreign funds are only now opening up, they continue
to be underweight," he added.
For the auction results, click on []
Currency markets across the region were quiet with traders
eyeing newsflow from core markets.
The forint <EURHUF=> was 0.7 percent higher by 1054 GMT,
while the Polish zloty <EURPLN=> was down 0.5 percent and the
Czech crown <EURCZK=> and Romanian leu <EURRON=> flat.
"We are watching the EUR/USD cross and any potential news on
the Hungarian reforms," a Budapest-based dealer said.
The crown is the region's safe haven and top performer in
2010 and this year, but has see-sawed in recent sessions, with
corporates using crown rallies to buy the euro, dealers said.
"This could be a hint a lot of corporates don't see the
crown lower than 24.00, so it might be a good sign to buy dips
(in the euro)," CSOB dealer David Sykora said.
Investors are watching for signs of higher inflation in
Poland as the economy probably grew by 3.7 percent in 2010, the
fastest growth in the region, according to a Reuters poll.
Polish GDP data is due on Friday.
Retail sales surged by 12 percent in December from a year
earlier, indicating solid fourth-quarter economic growth.
[]
The data indicates continued strong demand, UniCredit said
in a note to clients.
"We see (central bank rate-setters) watching the data
carefully with a focus on Jan/Feb inflation and PLN movement,
with the next (rate) hike coming in March at the earliest,"
Unicredit said.
Poland in January increased interest rates for the first
time after an 18-month hiatus, to 3.75 percent from an all-time
low of 3.5 percent.
A Polish rate-setter on Wednesday said another hike in the
second quarter was very likely. []
The Czech 3x6 FRA <CZK3X6F=> dipped 2 basis points on
Thursday from Wednesday after central bank Governor Miroslav
Singer said late on Wednesday that inflationary pressures
existed but the strong crown currency was taming them, and it
was impossible to say when rates would start to rise.
[]
The Polish bond market was quiet on Thursday, but dealers
said sentiment was still not supportive for Polish
debt.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.184 24.194 +0.04% +3.37%
Polish zloty <EURPLN=> 3.901 3.88 -0.54% +1.46%
Hungarian forint <EURHUF=> 272.95 274.75 +0.66% +1.84%
Croatian kuna <EURHRK=> 7.406 7.408 +0.03% -0.35%
Romanian leu <EURRON=> 4.265 4.264 -0.02% -0.75%
Serbian dinar <EURRSD=> 103.9 104.51 +0.59% +1.95%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 3bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +70bps over bmk*
10-yr T-bond CZ9YT=RR -1 basis points to +69bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +359bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +334bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +307bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +5 basis points to +519bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +471bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +410bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1154 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaux, writing by Marton
Dunai/Krisztina Than; Editing by John Stonestreet)
