* Investors await progress in Czech coalition talks
* Polish privatisation seen supporting zloty
(Updates throughout)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, June 2 (Reuters) - Emerging Europe's
currencies slipped on Wednesday, with Czech markets in
wait-and-see mode as coalition talks continued after a
centre-right victory in weekend elections.
Persistent worries over debt and growth in the euro zone,
central Europe's main trading partner, were keeping pressure on
regional assets, dealers said.
Czech centrist party Public Affairs, with no track record in
national politics, is negotiating a pact with the right-wing
Civic Democrats and TOP09 parties after the three won a
surprisingly clear majority.
The result boosted the crown to two-week highs on Monday,
but that rally has lost steam as the talks got going. If a
resolution is found quickly, the rally will likely resume,
analysts say. []
"Investors are waiting on negotiations of the coalition.
Nothing is sure yet, so there has been a correction (from the
gains after) the big election win," a Prague dealer said.
"We can get close to 25 (per euro) but I don't think we will
stay there long ... They can say they'll do reforms, but they
still have to do it and it takes time."
Some analysts say the risk of currency intervention may
increase if the crown tests new 2010 highs.
At 1354 GMT, the crown <EURCZK=> was 0.3 percent down on the
day to 25.813 per euro, the Romanian leu <EURRON=> and the
Polish zloty <EURPLN=> were also 0.3-0.4 percent weaker, while
the Hungarian forint <EURHUF=> was down 0.1 percent.
Stocks gained up to 1 percent, while bonds were mixed.
Thursday's government bond auctions <HUISSUE> will test
appetite for Hungarian assets, and yields may rise further, as
the market cuts back on bets of further interest rate cuts after
the central bank held fire on Monday.
STATE SELL-OFFS
Poland's ambitious privatisation plans, which aim to raise
some 25 billion zlotys this year, are accelerating with the sale
of the country's No. 2 utility Tauron due around June 30. The
second big initial share offer follows top insurer PZU's
<PZU.WA> $2.7 billion flotation last month.
Poland valued the IPO at a maximum of 5.2 billion zlotys
($1.55 billion) [].
The prospect of foreign investors swapping large amounts of
foreign currency for zlotys to buy state assets should support
the currency, but Polish markets are the most liquid in the
region and most vulnerable to changes in global risk appetite.
The zloty is still seen as a future outperformer in central
Europe due to better fundamentals. On Wednesday, deputy Finance
Minister Ludwik Kotecki said he expected the economy to grow by
3 percent or more in the second quarter [].
However, the crown and the leu have performed better than
the Polish unit so far this year. Investors sought Czech assets
as a safe haven in the wake of the euro crisis, while Romania's
central bank was seen defending a 4.1-4.2 leu/euro rate.
Polish assets remain attractive for investors, though, the
finance ministry finding enough demand and strong enough
reaction to hold a supplementary tender to Wednesday's two-year
bonds sale. []
Poland will choose a new president on June 20 after the
death of conservative incumbent Lech Kaczynski in a plane crash
in Russia in April.
The outcome will help determine the pace of reforms needed
to improve the European Union's largest ex-communist economy and
prepare it for euro entry.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.813 25.74 -0.28% +1.96%
Polish zloty <EURPLN=> 4.113 4.097 -0.39% -0.22%
Hungarian forint <EURHUF=> 276.05 275.65 -0.14% -2.06%
Croatian kuna <EURHRK=> 7.259 7.256 -0.04% +0.69%
Romanian leu <EURRON=> 4.187 4.174 -0.31% +1.2%
Serbian dinar <EURRSD=> 102.21 102.46 +0.24% -6.19%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -7 basis points to 126bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +161bps over bmk*
10-yr T-bond CZ9YT=RR +12 basis points to +151bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +416bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +376bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +316bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -2 basis points to +565bps over bmk*
5-yr T-bond HU5YT=RR +10 basis points to +537bps over bmk*
10-yr T-bond HU10YT=RR +15 basis points to +473bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1654 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz
and Marius Zaharia; editing by Patrick Graham)
