* Currency rally continues, led by zloty
* Polish bonds up as CPI seen easing; 2-yr bond tender
well-bid
* PMI rises in Poland, Hungary, Czech Republic
(Updates with zloty, bond moves, Hungary eurobond plans)
By Marius Zaharia
BUCHAREST, July 1 (Reuters) - The Polish zloty firmed over
1.5 percent on Wednesday, helped by rising regional PMI levels
and an improved global mood, while bond yields fell after a
well-bid tender and a rise in rate cut expectations.
Polish bond prices started to rise after the finance
ministry estimated inflation likely eased to 3.4 percent in
June, and below 3 percent in July, which may create more room
for monetary easing. [] []
They gained momentum after Poland sold 4 billion zlotys in
two-year bonds at an average yield of 5.41 percent, from 5.46
percent at a previous tender on June 3. []
"Bond yields fell on expectations that there is still more
room for interest rate cuts," said Maciej Slomka, chief
fixed-income dealer at Pekao.
At 1212 GMT, the zloty <EURPLN=> traded 1.6 percent stronger
at five-week highs of 4.391 per euro, leading regional gains.
The Hungarian forint <EURHUF=> added 0.5 percent, the Czech
crown <EURCZK=> gained 1 percent, while the Romanian leu
<EURRON=> firmed by 0.3 percent.
"There is positive sentiment on stock exchanges, stocks are
rising globally and generally the appetite for risk is rising
among investors," said Marcin Turkiewicz, dealer at BRE Bank.
"The scale of zloty gains is slightly surprising, however.
But I think that nevertheless the market has found a new range,
4.40- 4.50 and is likely to consolidate at those levels."
PMI releases on Wednesday showed the region's manufacturing
business crept closer towards the recovery line in June but
still shrank due to a dearth in demand from their main market,
the euro zone. []
The euro zone's factory PMI hit its highest level since
September, while the new orders index hit a one-year high.
[].
"PMI is rising, and not only in the region, but in the euro
zone as well, which is helpful for the currencies," one dealer
in Bucharest said.
RALLY SEEN HITTING BUMPS
The rally was started by the forint, which surged over 1.5
percent on Tuesday, a day after parliament approved crucial 2010
tax legislation and helped by better-than-expected first quarter
current account and May producer prices data. []
A broader firming in emerging Europe was led by the crown
which has gained around 14 percent since mid-February.
However, stronger currencies revived expectations of
interest rate cuts in the region, which also struggles with
banking fragility and the threat of a lat devaluation in Latvia,
which is why some analysts expect the rally to lose steam.
In debt markets, Polish yields fell by 8 basis points after
the CPI estimate and Hungarian yields fell as well in line with
forint's strengthening.
Hungary's finance minister said his country plans to issue a
eurobond by the end of September, hoping to capitalise on
growing investor confidence in the government's policies
[].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.757 25.999 +0.94% +3.87%
Polish zloty <EURPLN=> 4.391 4.46 +1.57% -6.29%
Hungarian forint <EURHUF=> 270.95 272.3 +0.5% -2.73%
Croatian kuna <EURHRK=> 7.28 7.27 -0.14% +1.17%
Romanian leu <EURRON=> 4.194 4.206 +0.29% -4.28%
Serbian dinar <EURRSD=> 93.15 93.44 +0.31% -3.94%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -35 basis points to 122bps over bmk*
4-yr T-bond CZ4YT=RR 0 basis points to +177bps over bmk*
8-yr T-bond CZ8YT=RR +12 basis points to +299bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -7 basis points to +404bps over bmk*
5-yr T-bond PL5YT=RR -5 basis points to +322bps over bmk*
10-yr T-bond PL10YT=RR -7 basis points to +285bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -4 basis points to +775bps over bmk*
5-yr T-bond HU5YT=RR -8 basis points to +702bps over bmk*
10-yr T-bond HU10YT=RR -15 basis points to +607bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1512 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 Ruth Pitchford)
