* Fx retreat slightly after 4 days of gains
* Poland, Czechs hold strong auctions
* Forint holds well, rating agencies urge fiscal measures
(Recasts with bond tenders, new prices and comments)
By Dagmara Leszkowicz and Sandor Peto
WARSAW/BUDAPEST, Sept 15 (Reuters) - Emerging European
currencies retreated slightly on Wednesday after four days of
gains, but risk appetite was firm and Poland and the Czech
Republic sold bonds at lower yields than at previous auctions.
The Polish zloty <EURPLN=> led losses, shedding 0.4 percent
against the euro to 3.943 by 1213 GMT, after a newspaper report
said Poland's 2010 budget deficit could exceed the planned 7
percent of gross domestic product. []
Figures released later showed the deficit stood at 36.92
billion zlotys in August or 70.7 percent of the full-year goal.
The Czech crown <EURCZK=> retreated after hitting 22-month
highs on Tuesday, falling 0.2 percent against the euro to
24.608. The Romanian leu <EURRON=> also weakened 0.2 percent to
4.242.
The Hungarian forint <EURHUF=> -- which has been volatile
over the past three months due to uncertainty over the new
government's budget policy -- held up relatively well, easing
only 0.1 percent to 282.
It has been supported in the past week after the government
said it planned to cut the budget deficit to below the European
Union's ceiling of 3 percent of GDP in 2011, years before most
EU members.
Hungary still has the highest debt-to-GDP ratio in the
region above 80 percent, and Standard & Poor's said the budget
pledge for 2011 was not sufficient to revise its negative
outlook on Hungary's debt rating. []
Moody's said it could downgrade Hungary if the government
fails to present a consistent fiscal plan. []
Dealers said the forint's gains took it past the 281 level,
and sellers could reappear if it still struggles through 280 in
the next few days as the government was unlikely to present
detailed budget plans before local municipality elections on
Oct. 3.
"Positioning was shorting the forint in the past two months.
Shorts have been closed (in the past week) but no one dares to
go long before Oct 3. The likely ranges are 281-286," one
Budapest-based dealer said.
STRONG DEBT TENDERS
The yield spreads of government bonds in the region over
German Bunds narrowed by around 5 basis points even though U.S.
Treasuries and Bunds trimmed losses after a slip in a key U.S.
factory activity gauge in September.
Poland and the Czech Republic sold long-term bonds on
Wednesday at lower yields than at previous auctions.
The Czechs sold 5 billion crowns ($263.3 million) worth of
nine-year bonds at an average yield of 3.143 percent, down 67.5
basis points from an auction in July.
Poland also sold all 3.0 billion zlotys ($989.1 million) of
bonds on offer. The bid-to-cover ratio was 2.98 times at the
sale, and the 5.456 yield was down by 35 basis points from a
June tender.
Hungary also had strong bond auctions last week, but its
yields -- which were flat at 6.8-6.9 percent on Wednesday -- are
much higher as Hungary, like Romania, is troubled by fiscal
problems and could face higher volatility, analysts said.
"So far we find little reason to adjust our macroeconomic
ordering, which puts Poland and the Czech Republic as the
cleanest economies in the region and most likely to post strong
growth numbers over the next two years," UBS said in a note on
the region.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.608 24.551 -0.23% +6.95%
Polish zloty <EURPLN=> 3.943 3.926 -0.43% +4.08%
Hungarian forint <EURHUF=> 282 281.72 -0.1% -4.13%
Croatian kuna <EURHRK=> 7.28 7.281 +0.01% +0.4%
Romanian leu <EURRON=> 4.242 4.234 -0.19% -0.11%
Serbian dinar <EURRSD=> 105.303 105.16 -0.14%
-8.95%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 79bps over bmk*
7-yr T-bond CZ7YT=RR +5 basis points to +89bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +80bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +388bps over bmk*
5-yr T-bond PL5YT=RR -5 basis points to +370bps over bmk*
10-yr T-bond PL10YT=RR -7 basis points to +306bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +585bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +541bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +450bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1613 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Dagmara
Leszkowicz; Editing by Susan Fenton)
