* Markets watch next week's debt auctions, CPI, GDP data
* Leu gives back some ground after c.bank comments
(Adds details on Romania tenders next week)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, Aug 6 (Reuters) - Romania's leu briefly
dipped on Friday after the central bank governor said he
"discouraged" more gains and warned the government it must
accept higher borrowing costs.
Governor Mugur Isarescu said the finance ministry should
consider meeting market yield demands in bond auctions,
following a period of scaling down issuance when it saw little
demand below a self-imposed cap of 7 percent. []
Romania holds two debt tenders next week and markets are
expected to keep watch on whether the finance ministry will
scrap its tactic of capping yields or not.
"Monday's tender could be successful as six-month T-bills
trade below 7 percent anyway, but Thursday's (one-year T-bill
auction) would be interesting to watch," one dealer in Bucharest
said. "I don't think they will sell the whole amount."
One-year paper was quoted at 7.2-7.3 percent on Friday.
Isarescu also said that he "discouraged" any strengthening
of the leu currency, which has fallen on political and fiscal
uncertainties, potentially giving the recession-mired economy a
shot in the arm by boosting exports.
At 1409 GMT, the leu <EURRON=> traded 0.4 percent stronger
on the day at 4.238 per euro, after falling from 4.235 to as low
as 4.254 during the session, partly in reaction to Isarescu's
comments.
The Czech crown <EURCZK=> dipped 0.2 percent but was still
near 21-month highs a day after the central bank held interest
rates steady and delivered milder comments than market players
had expected given the rapid firming of the crown this summer.
Governor Miroslav Singer said it was "no big drama" if the
crown, whose strength has helped curb inflation, stayed around
where it is now. But he added further appreciation at this pace
could change the inflation outlook and the bank may have to
react. []
The crown has been a top performer among central European
currencies this year, and has gained 4 percent since July thanks
to better risk appetite globally, improving economic data and
strong pledges by a new government to cut the budget.
Dealers said the central bank comments opened space for more
firming, and that resistance to weakening was found around the
24.800 level, where euro selling orders were placed.
TRADE
German demand helped Hungary and the Czech Republic extend a
manufacturing surge in June, with the two neighbours posting
strong export figures on Friday, although the data did not
influence markets. []
The forint <EURHUF=> rose 0.4 percent versus the euro and
the Polish zloty <EURPLN=> added 0.3 percent.
The Hungarian bond market was very illiquid with yields
little changed. Deals were few and far between, one dealer said.
"Next week will be interesting," he said. "There will be a
bond auction on Thursday with extra supply in a switch auction
on the 15-year bonds (on Wednesday), so especially the long end
will see some supply side pressure. Auctions have been sold in
recent weeks, but one remains cautious as that success might be
fleeting."
Hungary will sell 50 billion forints worth of 3-, 5- and
10-year bonds on Thursday. <HUISSUE> The switch auction will
target a maximum of 14 billion forints worth of short-end bonds
to be exchanged for 2023 maturity papers. <HUEXCHANGE>
Markets will also be looking at a raft of inflation and GDP
data across the region next week.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.749 24.711 -0.15% +6.34%
Polish zloty <EURPLN=> 3.975 3.985 +0.25% +3.25%
Hungarian forint <EURHUF=> 278.62 279.6 +0.35% -2.97%
Croatian kuna <EURHRK=> 7.223 7.216 -0.1% +1.19%
Romanian leu <EURRON=> 4.238 4.253 +0.35% -0.01%
Serbian dinar <EURRSD=> 105.69 105.82 +0.12% -9.28%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -18 basis points to 100bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +115bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +120bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +401bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +386bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +329bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -15 basis points to +589bps over bmk*
5-yr T-bond HU5YT=RR -8 basis points to +554bps over bmk*
10-yr T-bond HU10YT=RR -9 basis points to +463bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1509 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 and
Marius Zaharia; Editing by Ruth Pitchford/David Brough)
