* Crown up 1.7 pct, Czech bonds firm after centre-right win
* Other FX up, stocks dip; liquidity hit by US, UK holidays
* Hungary markets wait to see if c.bank pauses in easing
(Adds stocks, bonds, details)
By Jason Hovet
PRAGUE, May 31 (Reuters) - The Czech crown jumped on Monday
in a post-election bounce after a decisive victory for
centre-right parties raised market expectations the country's
next government will be stable and fiscally prudent.
In Hungary, markets were watching to see whether the central
bank would pause in its nearly year-long rate easing cycle after
risk aversion picked up since its last cut to a record low 5.25
percent. []
The three Czech centre-right parties, which led by the Civic
Democrats won 118 seats out of 200 giving them a comfortable
majority, have promised austerity measures and their victory was
the outcome investors had most hoped for. []
The possible centre-right coalition could be the strongest
in 18 years in a country that has not had a stable government in
the past decade, causing it to lag its neighbours in reforms.
The crown surged 1.7 percent in overnight and early trade
on Monday, firming to bid at 25.437 to the euro by 0835 GMT and
easily winning back the 0.8 percent of losses posted on Friday,
when markets feared an election stalemate. The vote was on
Friday-Saturday with the tally on Saturday.
Bond yields dipped 2-5 basis points on longer-dated bonds,
with the benchmark 2019 bond <CZ1002471=> yield quoted at a
one-week low of 4.003 percent.
"Assuming that a centre-right coalition takes power, it will
be a government of reforms and fiscal consolidation," Komercni
Banka analysts said.
"Good news for the economy and also for financial markets is
the fact that fiscal consolidation and budget deficit cuts will
be done mainly on the expenditures side."
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For a Take a Look on the Czech Parliamentary Elections,
click on: []
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TEST NEW HIGHS
Czech stocks <> were flat and other bourses were mixed
with U.S. and UK market holidays were hitting liquidity.
Romania's leu <EURRON=> trailed the region with a 0.2
percent dip as markets were wary over possible challenges for
the government's austerity plans that are crucial to further IMF
support. []. The Polish zloty <EURPLN=> added 0.2
percent and Hungary's forint <EURHUF=> gained 0.4 percent.
"Markets should be unfazed by the (Hungary) central bank's
likely decision to leave rates on hold today, but the adjoining
comments will be watched closely," CIB Bank said.
Currencies in the region often track the euro/dollar, and
the euro edged up on Monday to recover some losses made
following a Fitch downgrade in Spain's credit rating on Friday.
The crown, often seen as a relatively safe haven among
central European currencies, has led gainers in the region this
year with a 3.5 percent rise.
But it is 1.8 percent off this year's high of 25.015 per
euro, hit in mid-April, as the euro zone's debt crisis sours
investor appetite for risk.
Two new political parties, TOP09 and Public Affairs, would
be in the coalition now in the works. Commerzbank strategist
Lutz Karpowitz said the crown could test this year's high in the
coming weeks if coalition negotiations run smoothly.
"If it comes to the point where it is sure we are going to
have a strong government with a nice majority and with an aim of
fiscal consolidation then this is definitely good news for the
crown," he said. "This April low could be tested in the next
weeks."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.437 25.876 +1.73% +3.46%
Polish zloty <EURPLN=> 4.074 4.081 +0.17% +0.74%
Hungarian forint <EURHUF=> 274.6 275.81 +0.44% -1.55%
Croatian kuna <EURHRK=> 7.263 7.264 +0.01% +0.64%
Romanian leu <EURRON=> 4.171 4.163 -0.19% +1.59%
Serbian dinar <EURRSD=> 102.42 102.67 +0.24% -6.39%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 126bps over bmk*
7-yr T-bond CZ7YT=RR -9 basis points to +150bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +137bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1037 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 Ron Askew)
