* Zloty benefits from improved outlook, forint from carry
* Poland sells 5-yr bonds at strong auction, top-up tender
(Adds Polish bond auction, updates currencies)
By Marton Dunai and Marius Zaharia
BUDAPEST/BUCHAREST, July 15 (Reuters) - Poland's stabilising
outlook and Hungary's high yields propped up the zloty and the
forint during a global rally on Wednesday, but strong performer
Czech crown was choked by this week's disappointing data.
Risk appetite revived this week and investors were inspired
by Hungary's highest interest rates in the European Union at 9.5
percent and by Poland's easing inflation and bigger than
expected current account surplus.
Poland sold 2.01 billion zlotys in 5-year PS0414 bonds
maturing in 2014 at a primary tender on Wednesday, with bids
totalling as much as 6.35 billion zlotys for the paper.
It later sold a further 250 million zlotys of the 5-year
paper at a top-up tender.[]
"We have been more constructive on the zloty than its CE3
counterparts for some time now due to our belief that the
economy is in better shape than the other two in the region,"
said Roderick Nghoto, FX strategist at UBS.
"Zloty price action now is more consistent with that view.
We expect the zloty to see better upside than CE3 counterparts
in risk- positive markets, and less downside in risk-negative
markets," Nghoto said.
He added that the external shortfall data provided impetus
for the currency and warned that Poland's bulging budget gap may
pose an obstacle in the unit's expected outperformance.
A Polish central banker improved spirits by telling Reuters
in an interview rate cuts were unlikely until early 2010, while
envisaging the zloty in a gradual firming trend [].
By 1548 GMT, the zloty <EURPLN=> and the forint <EURHUF=>
had firmed about one percent, while the crown <EURCZK=> was way
behind, adding only 0.3 percent. The leu <EURRON=> was flat.
The leu has been the most stable unit in the region since
March, but the recent rally in the zloty and the forint -- the
most volatile currencies in the region this year -- has left the
Romanian unit the weakest year-to-date.
The forint draws more investors because of a higher carry
trade potential, a more liquid market and less protection from
the central bank, dealers said.
The crown, which is the only major currency in the region to
strengthen against the euro this year, is already expensive
compared to its peers and on top of that, it was also hit by a
second wave of damage from the global crisis.
The export-reliant economy, crippled by lukewarm demand from
the euro zone, is starting to suffer from evaporating domestic
consumption as shown by Tuesday's much weaker than predicted
retail sales and current account data.
"We can blame yesterday's figures," a Prague dealer said.
"People are more playing the zloty and the rand, which have
higher volatility."
On Wednesday, Czech producer prices data added to the gloom,
posting a record drop on the year in June. []
POLISH BOND AUCTION GOES WELL
Bonds were somewhat stronger on Wednesday as they tracked
stock and currency markets, dealers said. Hungarian yields
narrowed and Polish assets followed suit.
"The primary tender went well, demand was high and so were
the prices. A stronger zloty and improving global sentiment help
debt demand," a Warsaw based debt trader said.
"There are chances for further increases in debt prices, but
everything depends on global sentiment. Polish bonds are in more
risky baskets and sentiment globally must be good for them to
strengthen," he added.
The Hungarian debt agency has more than doubled government
bond sales planned for Thursday to 55 billion forints <HUISSUE>
from the last auctions two weeks ago when its original offer was
for 24 billion forints.[]
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.881 25.95 +0.27% +3.37%
Polish zloty <EURPLN=> 4.281 4.327 +1.07% -3.88%
Hungarian forint <EURHUF=> 272.9 275.41 +0.92% -3.43%
Croatian kuna <EURHRK=> 7.326 7.327 +0.01% +0.53%
Romanian leu <EURRON=> 4.217 4.213 -0.09% -4.8%
Serbian dinar <EURRSD=> 92.14 93.2 +1.15% -2.89%
All currency data taken from Reuters at 1746 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -3 basis points to 153bps over bmk*
4-yr T-bond CZ4YT=RR -7 basis points to +169bps over bmk*
8-yr T-bond CZ8YT=RR +12 basis points to +311bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -12 basis points to +385bps over bmk*
5-yr T-bond PL5YT=RR -10 basis points to +310bps over bmk*
10-yr T-bond PL10YT=RR -13 basis points to +280bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -17 basis points to +722bps over bmk*
5-yr T-bond HU5YT=RR -25 basis points to +643bps over bmk*
10-yr T-bond HU10YT=RR -27 basis points to +535bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1645 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; Writing by Marton Dunai and
Marius Zaharia; Editing by Victoria Main)
