* Austrian cbank gov says E.Europe meltdown panic over
* Hungary tax vote crucial for the forint
* Expected rate cut in Romania puts pressure on leu
By Kuba Jaworowski
(Adds bond market data, trader quote)
WARSAW, June 29 (Reuters) - Central Europe's currencies
ticked up on Monday following weekend comments from Austria's
central bank governor, who declared that panic over a possible
meltdown in the region was over.
Bond prices across the region remained little changed
compared to Friday levels and investors kept a close eye on a
Hungarian vote on tax changes crucial to the 2010 budget, due
later on Monday.
The vote is expected to pass and is vital for Budapest to
secure more of its $25.1 billion in aid from the International
Monetary Fund and European Union.
"If they (Hungarian parliament) fail to pass the tax laws,
the forint will presumably weaken," a dealer in Budapest said.
"But even this morning, they said the laws will pass. We'll
see."
At 0938 GMT, the forint bid 0.1 percent up at 276.25 against
the euro compared to Friday. The zloty gained 0.3 percent and
the Czech crown held on the strong side of 26 per euro.
In Romania, where the leu was steady, dealers said the
currency could feel the pinch of downward pressure due to an
expected 50 basis point cut in the country's interest rate. The
decision is due on Tuesday.
"We expect a 50 basis point rate cut to 9 percent and see
risks for a 75-100 bp cut, given the prospects for disinflation
and sharper contraction," Nicolaie Alexandru-Chidesciuc chief
economist at ING Bank in Bucharest said in a research note.
Dealers said the forint and other currencies in the region
could weaken as risk aversion on global markets rose, with
Japan's bourse tumbling 1 percent on Monday and the dollar
posting gains in bids for save havens.
Polish bond markets awaited details of bonds and T-bills
supply for the third quarter due at 1000 GMT. Last week a senior
finance ministry official told Reuters in July the ministry
would offer papers worth about the same as in June.
WORST OVER
On Saturday, Austrian central bank Governor and ECB
governing council Member Ewald Nowotny said there was no longer
a perception of a special problem for Austria due to the huge
exposure of Vienna based banks in Eastern Europe. []
Helped by pledges of external aid for those countries that
may need it, currencies are 3-9 percent stronger since the end
of February, when worries over central Europe's growth,
financing and banks pummelled the region -- sending the zloty
near an all-time low near 4.93 per euro and the forint to its
lowest ever at 317 at the time.
The economic downturn is expected to worsen loan performance
in central Europe, while weak currencies have raised costs for
thousands of households that borrowed in foreign currencies.
The zloty has shed more than 25 percent of its value against
the euro in the last year, leading currencies down from record
highs last summer, while the crown has lost 8.3 percent.
Some dealers said small changes and quiet trade on the bond
markets could suggest the traditional summer lull was near.
"People now seem to think more about grabbing a good deal on
a last minute holiday package than about moving the market in
any particular direction," said Olgierd Zieblinski, fixed income
trader at Rabobank in Warsaw.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.973 25.983 +0.04% +3%
Polish zloty <EURPLN=> 4.492 4.507 +0.33% -8.39%
Hungarian forint <EURHUF=> 276.25 276.55 +0.11% -4.6%
Croatian kuna <EURHRK=> 7.277 7.265 -0.16% +1.21%
Romanian leu <EURRON=> 4.216 4.215 -0.02% -4.78%
Serbian dinar <EURRSD=> 94.06 93.616 -0.47% -4.87%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to 156bps over bmk*
4-yr T-bond CZ4YT=RR +3 basis points to +181bps over bmk*
8-yr T-bond CZ8YT=RR +12 basis points to +299bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +820bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +747bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +659bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1140 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaux; Writing by Kuba Jaworowski;
Editing by Victoria Main)
