* Polish FinMin close to interest rate swap deal
* Crown weak after hawkish cbanker says to miss meeting
* Hungary's markets closed for national holiday
(Adds fixed income, detail)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, March 14 (Reuters) - Plans by the Polish
finance ministry to carry out interest rate swaps (IRS) boosted
Polish fixed rate government bonds on Monday and sent the zloty
back near three-month lows.
Deputy Finance Minister Dominik Radziwill told Reuters the
ministry was prepared for the transactions, in which it would
pay a floating rate while receiving a fixed rate, but was
waiting on market conditions. []
While the move was a boost for fixed income markets, sending
bond yields down by up to 4 basis points, the prospect of it
capping yields for zloty assets put pressure on a currency
already struggling with poorer global risk appetite due to the
devastation in Japan.
"The sentiment improved on our market because of Radziwill's
comments about possible IRS transaction," said one fixed income
Warsaw-based dealer. "The swap curve immediately fell (after the
comment) and this also supported the bonds market."
The zloty <EURPLN=> fell some 0.3 percent against the euro
by 1455 GMT.
The Czech crown <EURCZK=> edged 0.1 percent lower, while
Romania's leu <EURRON=> was up 0.2 percent. Hungary's forint
<EURHUF=> was virtually flat, with local markets closed on
Monday and Tuesday for a national holiday.
Stocks in the region were also mixed, with only Prague <>
down a touch.
Against that backdrop, there was little help from the euro's
gains against the dollar after euro zone policymakers surprised
markets by agreeing to bolster a bailout fund for troubled
countries and make its loans cheaper. []
"The zloty was hit the most, not only because it's the most
liquid currency (in the region) but also because the country's
monetary tightening outlook has deteriorated somewhat and fiscal
concerns weigh on the unit," said Thu Lan Nguyen, FX analyst at
Commerzbank.
RATE OUTLOOK OVERPRICED?
The zloty has lost almost 4.5 percent from multi-month highs
hit in January as central bankers played down expectations that
rates will rise again quickly following January's rate hike of
25 basis points.
Markets, however, are still pricing in four interest rate
increases totalling 100 basis points by the end of 2011.
In the Czech Republic, following weaker GDP data last week,
expectations the bank would rush to begin monetary tightening
were dealt another blow with news that one of the rate setters
advocating a rate hike would miss the meeting this
month.[]
On the data front, the Czech current account deficit
narrowed to 0.31 billion crowns in January from 4.7 billion
reported for December.
A change to trade data methodology last week meant a large
revision translated into a deficit of 139.2 billion crowns, or
3.8 percent of GDP, at the end of December.
Analysts have warned the revision to trade surpluses could
lead to medium-term weakening of the crown. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.283 24.26 -0.09% +2.95%
Polish zloty <EURPLN=> 4.028 4.015 -0.32% -1.74%
Hungarian forint <EURHUF=> 272.1 272.25 +0.06% +2.16%
Croatian kuna <EURHRK=> 7.386 7.389 +0.04% -0.08%
Romanian leu <EURRON=> 4.178 4.185 +0.17% +1.32%
Serbian dinar <EURRSD=> 102.91 102.9 -0.01% +2.93%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +4 basis points to 12bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +65bps over bmk*
10-yr T-bond CZ9YT=RR -4 basis points to +71bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +343bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +332bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +304bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1556 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz,
editing by Patrick Graham)
