* Forint,bonds gain as S&P lifts Hungary outlook to stable
* Zloty up on agreement with Eureko
* Leu under pressure after govt split
* Czech markets start pricing in rate cut
(Adds S&P's outlook revision for Hungary)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, Oct 2 (Reuters) - The forint outperformed
the region on Friday after Standard & Poor's upwards revision of
Hungary's outlook, while the zloty cut earlier losses after
Poland agreed with Eureko for a lower dividend than feared.
S&P changed Hungary's sovereign rating outlook to stable
from negative, saying government's measures will contain a
deterioration in public finances despite a deep recession
[].
The forint <EURHUF=> firmed to 267.5 from 269.8 to the euro
after the revision, but quickly retreated to 268.9 by 1242 GMT
to trade 0.8 percent up from the previous domestic close.
"That gave a boost to the market," one dealer said. "(But) I
don't expect a very sustained impact, this was more of a
psychological move, this alone will not send the forint to 260."
"We will slowly drift back towards the equilibrium around
270, and the 265-275 range is here to stay."
Bond yields also retreated after the move, after early
rises, mainly at the short end of the yield curve where
three-year yields dropped 12 basis points from early levels, but
were still higher by five basis points from Thursday.
In Poland, the government signed a deal with Dutch company
Eureko to regain full control of the region's biggest insurer,
PZU, which will pay a special dividend of 12.75 billion zlotys
($4.33 billion).[]
The zloty <EURPLN=> jumped on the news to bid at 4.255 to
the euro, up 0.3 percent on the day after bidding down 0.5
percent earlier.
"It appears a clear 'sell (EUR) on the news' case," Mateusz
Szczurek, chief economist said in a note after the agreement.
Worries over a large dividend flooding markets have hung on
the zloty in the past few weeks, and dealers said the currency
could gain again after losing around 2 percent in September.
Elsewhere, the Czech crown <EURCZK=> inched down.
Dealers said the crown may test the 25.500 per euro level,
which it hasn't breached since mid-September, in coming sessions
after central bank minutes raised chances of another interest
rate cut this year.
Central bank chief Zdenek Tuma was outvoted by the board at
last week's decision to leave rates flat last week instead of
lowering them, minutes from the meeting showed. []
Interbank interest rates dropped as much as 8 basis points
after the minutes were released, with 2-year interest rate swaps
<CZKAM6PR2Y=> quoted at 2.45 percent, down from 2.50 as markets
started re-pricing in rate cuts.
"This is quite a surprise for many guys that Tuma and Singer
were the most dovish on the board, said on Prague-base dealer.
"This could indicate that we could see a 25 basis point cut at
the November meeting."
ROMANIA INSTABILITY
In Romania the leu was still under pressure after the
governing coalition split on Thursday, putting the country's
International Monetary Fund aid at risk. []
Romania's Social Democrats quit the coalition government on
Thursday in protest at the sacking of a minister before
November's presidential election. [] []
"It's easing because of the government split, and the worst
is that nobody knows what happens next," one dealer said.
The leu <EURRON=> was 0.2 percent weaker to the euro, bid at
4.28. Dealers said the Romanian unit's declines might be capped
by possible central bank intervention.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.445 25.416 -0.11% +5.14%
Polish zloty <EURPLN=> 4.255 4.269 +0.33% -3.29%
Hungarian forint <EURHUF=> 268.91 271.03 +0.79% -1.99%
Croatian kuna <EURHRK=> 7.255 7.26 +0.07% +1.52%
Romanian leu <EURRON=> 4.28 4.27 -0.23% -6.21%
Serbian dinar <EURRSD=> 93.013 92.93 -0.09% -3.8%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -6 basis points to 161bps over bmk*
7-yr T-bond CZ7YT=RR -17 basis points to +188bps over bmk*
10-yr T-bond CZ10YT=RR +2 basis points to +181bps over bmk*
h
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +7 basis points to +396bps over bmk*
5-yr T-bond PL5YT=RR +7 basis points to +347bps over bmk*
10-yr T-bond PL10YT=RR +11 basis points to +315bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +8 basis points to +557bps over bmk*
5-yr T-bond HU5YT=RR +10 basis points to +530bps over bmk*
10-yr T-bond HU10YT=RR +14 basis points to +482bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1442 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets:
All emerging market news []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus; Writing by Dagmara Leszkowicz
and Marius Zaharia; Editing by ...)
