* Risk demand, stocks stay up; zloty outperforms
* Polish bonds extend gains from Wed auction
* Romania leu can't shake politics
(Adds details, fixed income)
PRAGUE, Oct 15 (Reuters) - The Polish zloty jumped ahead of
other central European currencies on Thursday, with higher
equity markets keeping the region at stronger levels even as
politics continue to weigh.
The zloty, beaten down to start the month, broke below 4.20
to the euro which it has flirted with over the past week, and
shook off a potential first setback in the government's
privatisation plans to gain 0.5 percent by 0921 GMT.
Dealers said the unit, supported by the only economy to
avoid recession this year, reacted more than peers to investors'
rising risk appetite, especially as Latvia moves closer to a
budget agreement and removes some concerns for the region.
"The zloty has been a bit undervalued in recent weeks
compared to peers," a Warsaw-based dealer said. "So we are now
reacting a bit stronger to the better sentiment, and higher
equity markets and weaker dollar."
Polish bond yields dropped a 3-8 basis points following
Wednesday's first tender of infrastructure bonds that saw
investors bid almost four-times what was sold. []
Warsaw's index <> edged higher and Budapest <> was
up around half a percent, building on gains after the U.S. Dow
Industrial index <> jumped above 10,000 points for the first
time in a year. []
Hungary's forint <EURHUF=> rose 0.1 percent to 267 per euro,
while the Czech crown <EURCZK=> and Romanian leu <EURRON=>
drifted sideways, with the latter clinging near a seven-month
low after a government collapse this week.
On Wednesday, President Traian Basescu rejected a proposal
to endorse a government of technocrats. He instead called on the
opposition and the Democrat Liberals of outgoing Prime Minister
Emil Boc to offer an experienced economist as prime minister to
help fight Romania's recession. []
"We can expect more downfalls if political instability is
prolonged," said one dealer with a foreign bank in Bucharest.
NOT CLEAR
Rising risk appetite in global markets has buoyed central
European assets this week even as political instability rises
and governments struggle to control growing budget deficits.
Analysts have warned political uncertainty in Romania along
with spillover fears from Latvia, which is wrangling over public
spending cuts needed to protect an IMF aid package and a
currency peg, could again knock the region lower. []
Poland, the only country in the region to avoid recession,
is counting on privatisation funds to keep its budget gaps from
triggering debt levels that, if breached, would require steep
mandatory spending cuts.
The Polish treasury ministry said on Wednesday that sole
bidder German utility RWE <RWEG.DE> would not make a binding
offer for Polish peer ENEA <ENAE.WA>, putting the sale in doubt
for this year. []
"A clear blow to the dynamics of the privatisation process
and an Achilles heel of the whole budget programme," Cheuvreux
economist Simon Quijano-Evans said in a Thursday note.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.842 25.868 +0.1% +3.53%
Polish zloty <EURPLN=> 4.196 4.215 +0.45% -1.93%
Hungarian forint <EURHUF=> 267.02 267.15 +0.05% -1.3%
Croatian kuna <EURHRK=> 7.258 7.254 -0.06% +1.47%
Romanian leu <EURRON=> 4.292 4.296 +0.09% -6.47%
Serbian dinar <EURRSD=> 93.16 93.02 -0.15% -3.95%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +13 basis points to 132bps over bmk*
7-yr T-bond CZ7YT=RR -8 basis points to +132bps over bmk*
10-yr T-bond CZ10YT=RR -7 basis points to +109bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +360bps over bmk*
5-yr T-bond PL5YT=RR -8 basis points to +317bps over bmk*
10-yr T-bond PL10YT=RR -12 basis points to +285bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +513bps over bmk*
5-yr T-bond HU5YT=RR -3 basis points to +451bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +402bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1124 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 Mike Peacock and Victoria main)
