* Romania markets cautious on second short-term auction
* Czech, Polish 5-year bond auctions due at cca 1000 GMT
* Bonds mostly steady, Hungarian gain on FX firming
(Adds bonds, updates prices)
By Jason Hovet
PRAGUE, July 14 (Reuters) - Stronger stock markets and a
firming euro underpinned emerging European currencies on
Wednesday, pushing the Hungarian forint to a three-week high.
The forint <EURHUF=>, the region's weakest performer this
year, led gains with a 0.3 percent rise to bid at 277.1 to the
euro by 0947 GMT. The stronger currency gave a lift to bonds,
with yields dipping 3-4 basis points.
The Polish zloty <EURPLN=> added 0.2 percent. The Czech
crown <EURCZK=> bid down a bit from Tuesday's domestic close.
Markets got a lift from stocks in the region that rose up to
2 percent, led by Bucharest <>, after a good start to the
U.S. earnings season. The euro, central Europe's main reference
currency, hovered around a two-month high against the dollar on
better risk appetite. []
"The positive sentiment on the zloty should continue and the
currency will probably follow euro/dollar moves," said one
Warsaw-based dealer.
However, dealers warned a turn downward in stocks or the
euro would drag on currencies.
Romania's leu <EURRON=> bid down 0.1 percent, just off a
one-week low. Markets were focused on the possibility of the
finance ministry holding another short-term deposit auction to
try to plug its funding gap, which would hit the currency.
The ministry borrowed 1.1 billion lei on the money market on
Tuesday and could opt for a similar action if a fresh treasury
bill tender on Thursday is not successful. []
The end of interest rate easing cycles in the region and
growing financing needs have put upward pressure on yields,
putting new focus on debt auctions, particularly in IMF-aided
countries like Romania.
CZECH, POLISH AUCTIONS LOOK CHEAP
The Czechs, who must meet more than half of their record
borrowing needs this year in the second half, auction 5-year
paper on Wednesday and may sell more than the offer.
The paper, a 3.40 percent coupon bond due 2015 <CZ1002737=>,
was quoted up a basis point at 3.057/2.931 percent. It was last
auctioned in May with an average yield of 2.936 percent, but bid
down from a June high of 3.234 percent.
"As this is the first auction in a Q3 packed with bond
offerings, the paper today will probably go quite cheap,"
Komercni Banka traders said in a note.
In Poland, growing expectations of a rate hike this year
after a higher-than-expected inflation reading this week could
dampen demand at a 5-year bond tender. []
Polish bond yields were stable before the auction.
Danske Bank said despite some pricing in of hikes in Polish
rates and yields over the past few weeks, there was still space
for more price action.
"We see some value in being positioned for a further
pricing-in of rate hikes. This could also be supportive of the
Polish zloty, which could get some support if the markets start
to expect an imminent initiation of a tightening cycle," Danske
said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.408 25.392 -0.06% +3.58%
Polish zloty <EURPLN=> 4.06 4.066 +0.15% +1.08%
Hungarian forint <EURHUF=> 277.1 277.92 +0.3% -2.44%
Croatian kuna <EURHRK=> 7.195 7.193 -0.03% +1.59%
Romanian leu <EURRON=> 4.26 4.256 -0.09% -0.53%
Serbian dinar <EURRSD=> 104.29 104.09 -0.19% -8.06%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 114bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +129bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +137bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +399bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +376bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +313bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -5 basis points to +592bps over bmk*
5-yr T-bond HU5YT=RR -6 basis points to +560bps over bmk*
10-yr T-bond HU10YT=RR -5 basis points to +471bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1050 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet;
editing by Stephen Nisbet)
