* Crown up 1.6 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
* Polish GDP comes in line with forecasts
(Adds Polish GDP, updates bond prices)
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 at 1200 GMT pause in its easing cycle after risk
aversion rose 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 in the Friday-Saturday vote
to give them a comfortable majority, have promised austerity and
their win was the result investors had 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 1.6 percent in overnight and early trade
on Monday, firming the most in more than a year to bid at 25.458
to the euro by 0956 GMT and easily winning back the 0.8 percent
loss on Friday, when markets feared an election stalemate.
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."
Political leaders were meeting on Monday with President
Vaclav Klaus, who could as early as today name someone to form
the next government.
Klaus may name the Social Democrat leader, in line with the
tradition of giving the leading vote getter a chance, but the
party is given little shot of finding coalition partners.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a Take a Look on the Czech Parliamentary Elections,
click on: []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
TEST NEW HIGHS
Czech stocks <> rose 0.3 percent and other bourses were
mixed with U.S. and UK market holidays were hitting liquidity.
Romania's leu <EURRON=> trailed the region with a 0.3
percent dip as markets were wary over possible challenges for
the government's austerity plans. [].
The Polish zloty <EURPLN=> added 0.1 percent, little moved
by strong first quarter GDP data that was in line with
forecasts.[] The forint <EURHUF=> rose 0.3 percent.
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, seen as a relatively safe haven among central
Europe, leads the region this year with a 3.4 percent rise.
But it is 1.8 percent off this year's high of 25.015 per
euro as the euro zone debt crisis sours risk appetite.
Two new political parties, TOP09 and Public Affairs, would
be in the Czech 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.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.458 25.876 +1.64% +3.38%
Polish zloty <EURPLN=> 4.079 4.081 +0.05% +0.61%
Hungarian forint <EURHUF=> 274.93 275.81 +0.32% -1.67%
Croatian kuna <EURHRK=> 7.263 7.264 +0.01% +0.64%
Romanian leu <EURRON=> 4.176 4.163 -0.31% +1.47%
Serbian dinar <EURRSD=> 102.51 102.67 +0.16% -6.47%
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 -5 basis points to +154bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +137bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +546bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +513bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +453bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1158 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
Spot FX rates
Eastern Europe spot FX <EEFX=> Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=> Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Ron Askew)
