* Polish bonds gain as Bratkowski turns dovish
* Hungary bond yields at 10-wk highs after U.S. debt selloff
* Irish debt worries keep downward pressure on region
(Updates with fixed income, quotes)
By Marius Zaharia
BUCHAREST, Nov 16 (Reuters) - Polish bonds gained on Tuesday
while the zloty inched down as a hawkish central banker talked
down the possibility of rise in interest rates next week, citing
the currency's recent strength.
Polish policymaker Andrzej Bratkowski changed his stance
after as recently as last week calling for a series of 25 basis
points hikes as soon as possible. []
Polish bonds outperformed regional peers in response, with
the two-year paper yielding 11 basis points less than the close
on Monday.
"The market paid attention to Bratkowski's comments, who
was, so far, the strongest hawk and now he's speaking about a
lack of rate hike this month," said Adrian Skubij, dealer at ING
bank in Warsaw.
His comments came after October inflation on Monday that was
below forecast. []
Governor Marek Belka has also said the country's improving
growth outlook could warrant some rate tightening, but further
zloty appreciation would curb the scope for it. []
"The tug-of-war within the MPC (Monetary Policy Council) is
likely to continue this week, further fuelling uncertainty
regarding a rate rise next week," Commerzbank said in a note.
"The zloty's upward potential therefore remains limited (in
the) short term."
At 1040 GMT, the zloty <EURPLN=> was down 0.2 percent, while
the Czech crown <EURCZK=> and the Hungarian forint <EURHUF=>
were down 0.1 percent. Romania's leu <EURRON=> was a tad higher.
IRELAND'S IMPACT
Investors remained sensitive to any sign that Ireland is
ready to bow to pressure and seek a bailout.
Hungarian bond yields rose 10-15 basis points to ten-week
highs across the curve, catching up with a sell-off in U.S. debt
overnight and hit by continued concerns over the euro zone's
debt crisis and whether Ireland will ask for foreign aid.
"There are no bids, only sellers," one trader in Budapest
said. "I can understand that after yesterday's U.S. bond
sell-off... This is mainly the overseas impact."
"Of course the Irish situation does not help either, or that
there is no (positive) change in Hungary."
Dealers said any sign of moves toward an Irish bailout from
a meeting of euro zone finance ministers in Brussels on Tuesday
could be positive for emerging Europe in the short-term, before
focus turns to other indebted states.
Central European assets tend to suffer when worries about
the currency bloc's debt crisis rise and investors take risk off
the table. But the fall in the credibility of some of the euro
zone's smaller borrowers makes some of the less indebted
economies further east look like better bets.
Most at risk from a rise in risk aversion are Hungary, whose
2011 budget is based on special corporate taxes which may in
turn delay economic recovery and Romania, whose financing
ability depends largely on aid flows from the International
Monetary Fund and other lenders.
The cost of insuring Hungary's debt rose 9 basis points on
Tuesday to 322, while Romania's rose 3 basis points to 313.
Despite better fundamentals, Polish markets, the most liquid
in the region, are also sensitive to shifts in risk appetite.
"An Irish bailout should be positive (for the region), but
there's talk about Portugal having (debt) problems as well,"
another dealer in Bucharest said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.589 24.557 -0.13% +7.03%
Polish zloty <EURPLN=> 3.934 3.925 -0.23% +4.32%
Hungarian forint <EURHUF=> 276.64 276.4 -0.09% -2.27%
Croatian kuna <EURHRK=> 7.389 7.395 +0.08% -1.08%
Romanian leu <EURRON=> 4.288 4.292 +0.09% -1.18%
Serbian dinar <EURRSD=> 106.9 106.69 -0.2% -10.31%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -10 basis points to 65bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +78bps over bmk*
10-yr T-bond CZ9YT=RR -1 basis points to +96bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -8 basis points to +366bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +358bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +315bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +17 basis points to +578bps over bmk*
5-yr T-bond HU5YT=RR +12 basis points to +547bps over bmk*
10-yr T-bond HU10YT=RR +14 basis points to +471bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1140 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Marius Zaharia;
Editing by Patrick Graham)
