* Forint reaches 10-month high, leu stuck on politics
* Czech Republic prices unflagged Swiss franc bond
* Czech, Polish debt well bid
(Adds bond tenders, quote, detail)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, Oct 21 (Reuters) - The Hungarian forint
pulled back from some gains after hitting its highest level this
year on Wednesday, but dollar weakness kept central European
currencies stronger on the day and extended a rally.
On debt markets, Czech Republic sold 4.77 billion crowns of
floating rate bonds, with bids three times what was sold and the
yield below interbank rates for the first time [].
It also priced an unflagged 500 million Swiss franc bond on
Wednesday [] to diversify its funding base.
In Poland, state-owned BGK bank sold 1.5 billion zlotys in
government-backed road bonds and 300 million more at a top-up
sale after investors' bids were more than double supply.
The sales bode well for debt tenders in Hungary and Romania
on Thursday, and Czech bonds held onto gains after the sales,
with yields dipping along the curve
"Many countries are using the bullish environment to issue
whatever they can," said UniCredit EMEA economist Gyula Toth.
"There is a window of opportunity open now."
Polish bonds were little moved by the government giving up
its 12 billion zloty 2009 privatisation plan [],
with investors already expecting this and needing more proof
that the government will increase borrowing as a result.
In currency markets, the forint <EURHUF=> led with a 0.4
percent rise to 264.35 to the euro by 1436 GMT, profiting mainly
from dollar weakness which also helped the Polish zloty
<EURPLN=> to keep pace with a 0.3 percent rise.
WATCHING DOLLAR
Dealers said investors were mostly ignoring local factors
that point to interest rate cuts in Hungary, possible looser
monetary policy in the Czech Republic, a Romanian political
stalemate, and widening budget deficits in central Europe.
However, gains for stock markets, which are at or near 2009
highs but eased some on Wednesday, and a weaker dollar have
boosted risk appetite and buoyed currencies in recent weeks.
"In the morning, when the forint surged, probably someone
knocked out a stop-loss level," one dealer said. "There are
people who only watch the euro/dollar cross."
The Czech crown <EURCZK=>, the only major central European
currency to trade stronger since the start of the year, was a
touch weaker on the day. The unit has been knocked this month by
dovish comments from key central bankers. []
Central Europe has been one of the hardest hit emerging
regions in the economic downturn, and its market rebound since
March has underperformed other developing countries.
Currencies have gained in the past week, led by more than 1
percent gains for the zloty and forint, with the latter on
expectations the central bank will moderate interest rate cuts.
In Romania, the leu <EURRON=> was stuck at around 4.29, with
investor concerns over efforts to form a new government tempered
by prospects of central bank intervention if the unit weakened
past 4.30 to the euro.
Romanian opposition parties on Tuesday refused to back
respected central banker Lucian Croitoru in his bid to become
prime minister, extending a political deadlock that threatens to
damage Bucharest's access to IMF aid. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.848 25.833 -0.06% +3.5%
Polish zloty <EURPLN=> 4.164 4.175 +0.26% -1.18%
Hungarian forint <EURHUF=> 264.35 265.35 +0.38% -0.3%
Croatian kuna <EURHRK=> 7.215 7.215 0% +2.08%
Romanian leu <EURRON=> 4.288 4.291 +0.07% -6.38%
Serbian dinar <EURRSD=> 93.101 93.102 0% -3.89%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +5 basis points to 105bps over bmk*
7-yr T-bond CZ7YT=RR -24 basis points to +91bps over bmk*
10-yr T-bond CZ10YT=RR -29 basis points to +81bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -10 basis points to +492bps over bmk*
5-yr T-bond HU5YT=RR -8 basis points to +436bps over bmk*
10-yr T-bond HU10YT=RR -10 basis points to +382bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1736 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Marius Zaharia, editing by Victoria Main)
