* FX off highs as stocks pull back from highs, euro slips
* Romanian markets cautious on second short-term auction
* Czech 5-year bond well-bid, Polish paper sees low demand
(Updates throughout)
By Jason Hovet and Jana Mlcochova
PRAGUE, July 14 (Reuters) - Emerging European currencies
slipped on Wednesday after stocks fell from highs, but the
Polish zloty bucked the trend, rising on growing rate hike
expectations.
The Polish Finance Ministry, however, sold less than the top
end of its offer of 5-year bonds, a day after a
higher-than-expected June inflation reading, and in contrast to
strong demand at a Czech 5-year bond sale.
Central European governments have battled rising yields on
their debt in recent months due to the ending of monetary easing
policies, high borrowing needs and fears over governments'
ability to deliver on fiscal austerity promises. []
However, while the Polish yield rose more than 20 basis
points at Wednesday's auction compared to a May sale, the Czech
yield edged up only slightly as markets appreciated the newly
elected government's austerity plans. []
<CZ1002737=>
The rise in Polish yields, coming after Poland placed dollar
bonds last week, had little impact on the zloty <EURPLN=>, which
touched a three-week high in afternoon trade on expectations
interest rates will rise later this year. It bid up 0.4 percent
at 4.052 to the euro by 1551 GMT.
"Higher-than-expected CPI could have contributed to
expectations that monetary tightening is going to be frontloaded
rather than backloaded," Michal Dybula, chief economist at BNP
Paribas in Warsaw, said.
A rise in interest rates would make bonds sold on Wednesday
less attractive in terms of yield.
The Hungarian forint <EURHUF=>, the region's weakest
performer this year, backed off its three-week high to bid down
0.1 percent on the day at 278.1 to the euro. The Czech crown
<EURCZK=> shed 0.3 percent from Tuesday's close.
Stock markets in central Europe closed up on the day but off
morning highs after U.S. retail sales disappointed and revived
fears of a stalled recovery, hitting global risk appetite.
The euro, central Europe's main reference currency, also
slipped from a two-month high against the dollar.
ROMANIA, HUNGARIAN TENDERS
The Czech and Polish auctions come before Romanian and
Hungarian tenders on Thursday. The Czechs and Poles have found
it easier to sell debt than Hungary or Romania, which are both
receiving aid from the International Monetary Fund and European
Union.
The Romanian leu <EURRON=> bid up 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. []
Yields on Czech bonds were around 2 basis points down on
shorter-dated paper, but stayed up on longer bonds. Pressure is
expected to stay as the finance ministry has left most of its
borrowing for the second half of the year and markets are
awaiting a delayed eurobond.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.464 25.392 -0.28% +3.35%
Polish zloty <EURPLN=> 4.052 4.066 +0.35% +1.28%
Hungarian forint <EURHUF=> 278.1 277.92 -0.06% -2.79%
Croatian kuna <EURHRK=> 7.214 7.193 -0.29% +1.32%
Romanian leu <EURRON=> 4.251 4.256 +0.12% -0.32%
Serbian dinar <EURRSD=> 103.94 104.09 +0.14% -7.75%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 109bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +127bps over bmk*
10-yr T-bond CZ9YT=RR -5 basis points to +134bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +397bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +375bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +314bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +4 basis points to +594bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +564bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +472bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1752 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 and
Jana Mlcochova; Editing by Stephen Nisbet and Susan Fenton)
