* FX slightly up after Friday's strong GDP data
* Romania expected to sell less than planned at Tbill tender
* Polish bonds extend gains, but firming potential limited
(Adds fixed income, fresh quotes)
By Marius Zaharia
BUCHAREST, Aug 16 (Reuters) - Central European currencies
inched up on Monday as worries over the recovery of some major
economies took the edge off forecast-beating GDP readings late
last week.
Data showed on Friday the region's economies performed
better than expected in the second quarter, but a much weaker
than expected growth figure for Japan weakened investors'
appetite for assets in riskier emerging markets.
Fears also linger over the growth-limiting impact of
spending cuts and frail domestic demand, especially in Hungary
and Romania. []
"The risk sentiment improved somewhat on the back of strong
Q2 GDP numbers out of Germany and fairly favourable Q2 GDP
figures in some CEE countries," Danske Bank said in a note.
"Going into this week, our EMEA FX Scorecard has turned
significantly more negative as the global score plummets.
Therefore, we could be heading for higher risk aversion and
another sell-off in the EMEA FX markets."
Romania's leu <EURRON=>, Hungary's forint <EURHUF=> and the
Polish zloty <EURPLN=> had risen 0.1-0.3 percent by 0924 GMT,
while the Czech crown <EURCZK=> was a touch weaker.
Hungarian bonds were steady in thin trade, while Polish
paper was a touch stronger, backed by Friday's
lower-than-expected inflation data. However, there was limited
room for more gains, dealers in Warsaw said.
"Investors' portfolios are already full of this paper.
Global mood is still uncertain and there are still concerns over
fiscal policy, so low inflation is the only positive sign (for
Polish debt)," one trader said.
ROMANIA TENDER
Investors fear a significant VAT hike and a deep cut in
public wages will deepen an expected contraction in Romania this
year and backfire by hitting state revenues.
This could endanger the country's deal with the
International Monetary Fund and other lenders, and investors
have responded by demanding higher premiums at debt auctions
than the finance ministry is willing to accept.
Romania tenders 800 million lei of 273-day treasury bills
later on Monday, but analysts say there is little chance that
the ministry will sell as much as planned if it sticks to its
self-imposed yield cap of 7 percent.
"We could see once again a marginal allocation as similar
paper is quoted on the secondary market marginally above 7
percent," ING Bank said in a note.
"Swap rates for this tenor are around 6.3 percent so this
could be an incentive, but more likely is that banks will wait
for the six-month auction scheduled next week and place bigger
amounts for six-month at 7 percent."
Analysts say the ministry's stubbornness to reject yields
over 7 percent is a dangerous play and Romania may be forced to
scrap this tactic in September-October when financing needs pile
up and pay even higher yields than those it rejects now.
Room to price Romania's policy risks in currency markets is
limited given investors' fear of central bank intervention.
Czech July PPI was slightly below forecasts, which analysts
said was neutral for the crown and underscored the case for
keeping interest rates unchanged at record lows at least until
the middle of the next year. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.838 24.813 -0.1% +5.96%
Polish zloty <EURPLN=> 3.994 4.005 +0.28% +2.75%
Hungarian forint <EURHUF=> 280.27 280.7 +0.15% -3.54%
Croatian kuna <EURHRK=> 7.234 7.232 -0.03% +1.04%
Romanian leu <EURRON=> 4.23 4.233 +0.07% +0.17%
Serbian dinar <EURRSD=> 104.42 104.85 +0.41% -8.18%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +3 basis points to 116bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +114bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +118bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +409bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +392bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +342bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +4 basis points to +602bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +552bps over bmk*
10-yr T-bond HU10YT=RR +4 basis points to +479bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1024 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia;
editing by Andrew Heavens)
