* Polish bonds firmer as market digests news of pension deal
* Markets eye Hungary pension vote later in day
* Czech cbankers say rates stable now, crown weak
(Adds new quote, detail)
By Jason Hovet and Dagmara Leszkowicz
PRAGUE/WARSAW, Dec 13 (Reuters) - Polish bonds got support
on Monday from news of a deal with the EU over the budgetary
treatment of pension reforms, while Eastern European currencies
got a lift from a rise in the euro against the dollar.
Poland's Finance Ministry reached an agreement with the
European Union on Friday aimed at loosening public finance rules
to take into account the cost of pension reforms, a move some
analysts say could bring the country closer to the euro zone.
[]
"It looks like the market received the news as positive and
this slightly supported the Polish debt," said Pawel
Bialczynski, dealer at BRE bank in Warsaw. "The reaction however
is not big, as the horizon (of joining the euro zone) is still
far away."
Prices were little changed, but dealers said the news had
underpinned Polish bonds in a generally weakening debt market.
On the forex market, currencies were a touch stronger, with
Hungary's forint edging up slightly ahead of a parliamentary
vote expected to pass plans to plug the country's budget gap
with private pension fund contributions.
The Czech crown was also slightly higher against the single
currency but analysts said interest rate differentials meant
further weakening was likely in the remainder of the year.
Czech rates, the lowest in the region at 0.75 percent, are
likely to stay as they are for the time being, Vice-Governor
Vladimir Tomsik was quoted as saying on Monday. []
Bank board member Eva Zamrazilova, the lone voter for a rate
rise in past meetings, said on Monday she saw no need to
immediately raise interest rates but repeated her view that
rates do not need to stay at record lows.
"We expect that rising global yields should weigh on the
Czech crown. Technically speaking, EUR/CZK could move further to
25.5 (per euro)," KBC analysts said on Monday.
By 1429 GMT the forint <EURHUF=> and the Czech crown
<EURCZK=> had each gained 0.1 percent versus the euro. The
Polish zloty <EURPLN=> was 0.4 percent stronger, leading gains
across the region, while Romania's leu <EURRON=> was flat.
FORINT CALM, OUTLOOK UNCLEAR
Hungary's central bank became the first in central Europe to
begin undoing two years of policy loosening with a surprise rate
rise last month, citing a weakening risk profile.
Hungarian lawmakers are widely expected to roll back a 1997
pension reform on Monday, allowing the government to effectively
seize up to $14 billion in assets to reduce the budget gap and
avoid austerity measures. []
RBC strategist Nigel Rendell said markets have priced in the
pension changes and would be driven by risk appetite and more
clarity from the rate outlook in the remaining sessions of 2010.
"It is going to be a combination of international factors
and any comments out of the central bank about potential
tightening of interest rates or conflicts with the economy
ministry," he said.
Prime Minister Viktor Orban's government, which enjoys a
large parliamentary majority, has taken a different fiscal route
than others in Europe, which have focused on slashing spending.
But the pension reforms, along with new taxes on banks and
business and the dropping of a 20 billion euro safety net from
international lenders, have spooked investors, triggered a
credit rating downgrade, and hit asset prices.
Government and central bank have also skirmished, with the
former calling for lower rates than the current 5.5 percent.
"Last week's inflation data supported the view of further
monetary tightening, so until it becomes clear just how long
this tightening cycle may last and where it may peak I do not
think you would see much action in bonds either," a Budapest
currency dealer said.
The forint has lost 5 percent against the euro since the
Fidesz government won power in April, while three-year and
five-year bond yields have jumped more than 2 percentage points
to almost 8 percent.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.143 25.162 +0.08% +4.67%
Polish zloty <EURPLN=> 4.014 4.028 +0.35% +2.24%
Hungarian forint <EURHUF=> 277.99 278.3 +0.11% -2.75%
Croatian kuna <EURHRK=> 7.406 7.388 -0.24% -1.31%
Romanian leu <EURRON=> 4.291 4.291 0% -1.25%
Serbian dinar <EURRSD=> 106.65 106.86 +0.2% -10.1%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 79bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +80bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +87bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +360bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +334bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +303bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +646bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +584bps over bmk*
10-yr T-bond HU10YT=RR 0 basis points to +499bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1529 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; Editing
by Catherine Evans)
