* Currencies gain on stronger euro, more upbeat markets
* Crown lags as investors eye Czech coalition talks
* Stocks, bonds stronger, Hungary auction eyed
(Adds bonds, stocks, updates markets)
By Krisztina Than and Marton Dunai
BUDAPEST, June 3 (Reuters) - Emerging European assets firmed
on Thursday, boosted by improved sentiment towards core markets,
but the Czech crown slightly underperformed the region as
investors awaited developments in coalition talks.
Earlier in the week markets had cheered the centre-right's
election victory with the crown <EURCZK=> scoring its biggest
gain in a year on Monday, bringing it below 25.5 per euro. But
that rally has sputtered. []
Three Czech centre-right parties met on Wednesday to try to
agree policies for a coalition government, but disagreements
looked likely in several areas and the probable prime minister
said a deal would take weeks. []
"This has been factored into the market, so no reaction. The
crown (eased) to 25.8, but this isn't for domestic reasons --
after nervousness eases, we expect a return to below 25.50 and
heading toward 25," local bank Ceska Sporitelna said in a
research note.
The crown <EURCZK=> was up 0.4 percent at 25.683 per euro on
Thursday morning.
President Vaclav Klaus, who has yet to ask someone to form
the next government, was due to meet with the most likely prime
minister, Civic Democrat leader Petr Necas, at 0800 GMT.
"We still have a positive bias for the crown, and believe
that it could gain further ground as soon as talks finalize and
the set-up of the new government becomes definite," CIB Bank in
Budapest said in a note.
At 0830 GMT, the Polish zloty <EURPLN=> led gains among
regional currencies, rising 0.9 percent, although markets there
were closed for a national holiday. The forint <EURHUF=> was 0.6
percent higher and the Romanian leu <EURRON=> was flat.
"We expect range trading to continue today, although at
somewhat firmer levels ... tracking the euro/dollar," a
Budapest-based currency dealer said.
Stocks also rose slightly, tracking core European markets,
which hit a two-week high. [] Budapest <> rose
2 percent by 0837 GMT, Prague <> added 1.8 percent, and
Polish stocks were 0.4 percent higher despite no local trading.
BONDS GAIN, HUNGARY AUCTION EYED
Hungarian and Czech bonds firmed slightly as well, although
concerns over debts, deficits and growth in the euro zone,
central Europe's main trading partner, continued to weigh on the
region's markets.
Thursday's government bond auctions in Hungary <HUISSUE>
will test appetite for local assets after the central bank held
fire on Monday, keeping rates at 5.25 percent. <NBHI>
A dealer said he expected the full 50 billion forints
($223.7 million) worth of bonds to sell, but appetite would be
muted, so yields may climb higher.
Czech bond yields dipped, with the benchmark 2019
<CZ1002471=> yield off two-month highs.
The Czech central bank surprised markets when it cut its
main rate to a new record low of 0.75 percent last month before
the elections, but a central banker told Reuters on Wednesday
that it was becoming increasingly difficult to cut rates
further.
Vice-Governor Miroslav Singer told Reuters that no event
since the last policy meeting had provided a reason to change
interest rates. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.68 25.775 +0.37% +2.48%
Polish zloty <EURPLN=> 4.065 4.1 +0.86% +0.96%
Hungarian forint <EURHUF=> 273.72 275.24 +0.56% -1.23%
Croatian kuna <EURHRK=> 7.259 7.259 0% +0.69%
Romanian leu <EURRON=> 4.184 4.185 +0.02% +1.28%
Serbian dinar <EURRSD=> 102.65 102.37 -0.27% -6.6%
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 -12 basis points to +149bps over bmk*
10-yr T-bond CZ9YT=RR -7 basis points to +138bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -10 basis points to +557bps over bmk*
5-yr T-bond HU5YT=RR -17 basis points to +512bps over bmk*
10-yr T-bond HU10YT=RR -3 basis points to +466bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1030 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Krisztina Than and Marton Dunai; editing by
Jason Webb and Susan Fenton)
