* Currencies higher, but sentiment remains negative
* Euro zone debt worries seen keeping pressure on CEE assets
* Romanian and Hungarian debt tenders eyed
(adds detail and bond prices)
By Marius Zaharia
BUCHAREST, May 20 (Reuters) - Central European currencies
took a breather after recent falls on Thursday, but mounting
worries that euro zone austerity plans could hurt growth in the
region kept markets under pressure.
Central European markets tracked a broad selloff on
Wednesday caused by Germany's move to clamp down on naked short
selling, but cooled by the end of the day due to a rebound in
the euro, emerging Europe's main reference currency.
Dealers said the euro/dollar cross remained volatile and
thin volumes meant the region's markets had little strength to
hold onto their morning gains for too long.
At 0911 GMT, the Hungarian forint <EURHUF=> was 0.6 percent
stronger, while the Polish zloty <EURPLN=>, the Romanian leu
<EURRON=> and the Czech crown <EURCZK=> were 0.1-0.2 percent up.
Stock and debt markets were broadly stable.
The crown and leu have held up best in the past week, losing
1.3 percent and 0.7 percent compared to 4 percent and 3.1
percent losses in the zloty and forint respectively.
The leu was helped by what dealers suspected to be covert
central bank interventions to keep it below 4.2 per euro. The
crown was supported by its safe haven status in the region.
"The situation on markets remains unclear," Komercni Banka
analysts said in a morning note. "Uncertainty should continue to
be reflected in raised volatility. But compared to the zloty or
forint, the crown should be less volatile."
Polish policymakers seem more happy with a weaker zloty.
Deputy Prime Minister Waldemar Pawlak said on Thursday that a
level slightly above 4.0 per euro helped the economy and its
competitiveness. []
DEBT TENDERS EYED
A 10-year bond tender in Romania is expected to fail later
in the day <BNR032>.
Dealers say investors will ask for higher yields due to
worries over the government's ability to enforce its austerity
plan, crucial to securing further aid from the International
Monetary Fund, and that the government will reject all bids.
The six-old month centrist cabinet has committed to drastic
cuts in wages and pensions, but markets fear it will bow to
mounting social pressure after tens of thousands of people
rallied in central Bucharest on Wednesday.
The IMF deal is the main anchor for investors willing to
finance Romania's ballooning budget deficit.
"After all bids were rejected at two previous ... T-bond
tenders this month, we believe this auction may have the same
result," ING Bank said in a note.
"If the Finance Ministry accepts some bids today ... it is
likely it will pay a premium of some 40 basis points over the
previous maximum yield level of 7.09 percent for a decent
amount."
Hungary, where domestic demand usually covers new debt
issues, is likely to sell the bonds offered <HUISSUE>.
Markets are also eyeing Poland's April industrial output
<PLIPY=ECI> and producer price <PLPPIY=ECI> data, due at 1200
GMT. Poland's central bank will also release minutes from the
April meeting of the rate-setting Monetary Policy Council.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.742 25.779 +0.14% +2.24%
Polish zloty <EURPLN=> 4.117 4.127 +0.24% -0.32%
Hungarian forint <EURHUF=> 279.94 281.68 +0.62% -3.43%
Croatian kuna <EURHRK=> 7.262 7.262 0% +0.65%
Romanian leu <EURRON=> 4.199 4.201 +0.05% +0.91%
Serbian dinar <EURRSD=> 101.85 101.466 -0.38% -5.86%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond <CZ2YT=RR> +6 basis points to +113bps over bmk*
7-yr T-bond <CZ7YT=RR> -1 basis points to +114bps over bmk*
10-yr T-bond <CZ9YT=RR> +4 basis points to +107bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond <HU3YT=RR> 0 basis points to +556bps over bmk*
5-yr T-bond <HU5YT=RR> +6 basis points to +520bps over bmk*
10-yr T-bond <HU10YT=RR> 0 basis points to +432bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1211 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux, writing by Marius Zaharia;
Editing by Kevin Liffey)
