* Markets eyeing Hungarian fiscal plan, Polish rate meeting
* Forint leads, Hungarian 3-yr bond yields hit 4-month low
* Romanian budget record surplus, leu currency firmer
* Czech crown, yields edge higher on cbanker rate comments
(Recasts with new comments, prices)
By Luiza Ilie and Sandor Peto
BUCHAREST/BUDAPEST, Feb 28 (Reuters) - Hungarian government
bonds and the forint firmed on Monday, leading asset price rises
in the European Union's east wing ahead of the announcement of
Hungarian reforms expected for Tuesday.
A strengthening of the euro, the reference currency of the
region, against the dollar also improved sentiment.
Hungarian assets have benefitted from hopes that the
government would deliver a broadly credible plan to put its
public finances straight over the next three years, but traders
said investors remained nervous about the detail of the plans.
"Expectations (about Hungary's reform plan) may have become
slightly overheated," one Budapest-based currency dealer said.
"The plan may well disappoint and that warns me to stay
cautious, I don't take part in this (rally)."
Unrest in the Middle East and Africa also pose risks to
global market sentiment, and Poland's central bank rate decision
on Wednesday is the region's other key event this week.
The forint <EURHUF=> firmed 0.6 percent against the euro by
1501 GMT to 270.63.
Poland's zloty<EURPLN=> gained 0.6 percent, the Czech crown
<EURCZK=> half a percent and Romania's leu<EURRON=> 0.4 percent.
Hungarian government bond yields fell 10-15 basis points
mainly due to buying by some foreign investors, after
roller-coaster trading on Friday, traders said.
Three-year yields were around 6.68 percent at 1428 GMT, off
4-month lows hit earlier in the day at 6.60 percent.
Hungary is expected to announce the budget programme at 1000
GMT on Tuesday, expected to save 600 billion to 700 billion
forints ($3 billion - $3.5 billion) by 2013, with measures
tilted towards state spending cuts rather than tax increases.
[]
Another dealer said: "It's a total dark horse, this package.
Anything substantive will be welcome on the market, though, so I
don't expect a big correction even if the measures fall short of
expectations slightly."
"I don't think that the package will answer all the
outstanding questions, it could include details which will
require analysis," one Budapest-based fixed income trader said.
MIDDLE EAST, POLAND WATCHED
Oil prices rose more than $1 per barrel on Monday as
protests in Oman fuelled wider concern about security of crude
supply from the Middle East after unrest in oil producer Libya.
A thin majority of analysts expected Poland's central bank
to leave borrowing costs unchanged on Wednesday, following a
quarter point hike in January, but monetary tightening is seen
as far from over. []
"Undoubtedly, this week's eye-catcher is the Monetary Policy
Council's meeting," KBC said in a research note. "Although we
think that interest rates will be kept at current levels, a
certain part of investors clearly bets on a rate hike."
Czech assets firmed after central bank Governor Miroslav
Singer was quoted by magazine Profit as saying that while low
Czech interest rates are not sustainable in the long term, they
work for now. []
Dealers also said the market was supported by expectations
that second quarter bond issuance calendar, due on Tuesday,
would be low and that the Czechs may tap foreign bond markets in
the first half of the year. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.34 24.457 +0.48% +2.71%
Polish zloty <EURPLN=> 3.961 3.974 +0.33% -0.08%
Hungarian forint <EURHUF=> 270.63 272.15 +0.56% +2.72%
Croatian kuna <EURHRK=> 7.419 7.421 +0.03% -0.53%
Romanian leu <EURRON=> 4.202 4.217 +0.36% +0.74%
Serbian dinar <EURRSD=> 103.38 103.2 -0.17% +2.46%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -5 basis points to 19bps over bmk*
7-yr T-bond CZ7YT=RR -11 basis points to +78bps over bmk*
10-yr T-bond CZ9YT=RR -8 basis points to +81bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -21 basis points to +489bps over bmk*
5-yr T-bond HU5YT=RR -30 basis points to +456bps over bmk*
10-yr T-bond HU10YT=RR -24 basis points to +407bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1601 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaux; writing by Luiza Ilie/Sandor
Peto; editing by Patrick Graham)
