* Polish markets turned to govt's long-term finance plan
* Polish bonds weaker on 2011 budget gap
* Leu leads FX gains, Bucharest plans euro debt
By Kuba Jaworowski and Jason Hovet
WARSAW/PRAGUE, July 30 (Reuters) - Polish bonds dipped and
the zloty held steady on Friday as markets absorbed details of a
higher-than-expected 2011 budget gap as part of the government's
long-term financing plan to be approved later in the day.
Investors have turned a sharper eye on government finances
in central Europe this month after Hungary's new administration
halted talks with lender the International Monetary Fund, while
worries stay high over IMF-mandated austerity in Romania.
In contrast, the Czech crown has been a top performer and
scaled 20-month peaks on higher trading volume this week, with
the belief that the country's new centre-right government will
continue to rein in budget spending.
A source told Reuters late on Thursday that Poland's central
government budget gap in 2011 would be higher than previously
expected at 45 billion zlotys ($15 billion), which currencies
and bonds took in stride. []
Analysts had forecast on average a budget deficit of 38
billion zlotys next year. []
On Friday, a document obtained by Reuters showed Poland
would delay cutting its deficit to the European Union's 3
percent ceiling by one year to 2013 and expects net borrowing
needs to fall to 57.5 billion zlotys next year. []
"I think this (budget gap news) is quite neutral for the
zloty after all. (The deficit) is greater than in your (Reuters)
poll but in 2009 when there were plans for a higher 2010 deficit
the negative surprise was greater," said Rafal Benecki, senior
economist at ING Bank.
Polish bond prices fell on Friday, while the zloty <EURPLN=>
was steady on the day at 4.008 to the euro by 0944 GMT.
The crown <EURCZK=> inched down 0.1 percent to 24.791 to the
euro. Hungary's forint <EURHUF=> dipped 0.1 percent to 284.65
and Romania's leu <EURRON=> led gains with a 0.1 percent rise to
a 3-week high of 4.242.
DEBT, DEBT
Romania's finance ministry, battling to keep yields down on
local debt, confirmed reports on Friday that it would issue more
than 7 billion euros on foreign bond markets over the next three
years, with a first sale to be scheduled soon. []
Hungary was able to lift its offer in its first debt sale
since a collapse of IMF talks in the middle of July, giving a
boost to local markets. [] But bond yields rose by
about 10 basis points on Friday, giving up previous gains.
"The forint's weakening has driven the yield rise, but there
are no deals in the market," one Budapest-based fixed income
trader said. "I would not say that the optimism has been broken
but the post-auction momentum has disappeared."
Strong investor appetite in emerging markets has kept
Hungarian assets from falling as much as during some periods of
market volatility since the financial crisis started at the end
of 2008, pushing Hungary into an IMF aid deal.
In Czech markets, attention was turned to an Aug. 5 interest
rate setting meeting seen holding rates flat. Analysts expect
weakening back toward the 25 per euro level -- where
policymakers have verbally intervened before to protect exports.
"We believe the current crown rate is below the central
bank's (new) forecast that will be published next Thursday, and
the crown will likely be cited as a significant
anti-inflationary factor," Komercni Banka analysts said.
"The upcoming meeting (on Aug. 5) could force the crown into
a correction."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.791 24.766 -0.1% +6.16%
Polish zloty <EURPLN=> 4.008 4.006 -0.05% +2.4%
Hungarian forint <EURHUF=> 284.65 284.5 -0.05% -5.02%
Croatian kuna <EURHRK=> 7.235 7.243 +0.11% +1.03%
Romanian leu <EURRON=> 4.242 4.247 +0.12% -0.11%
Serbian dinar <EURRSD=> 106.227 106.14 -0.08% -9.74%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 98bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +97bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +108bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +12 basis points to +601bps over bmk*
5-yr T-bond HU5YT=RR +11 basis points to +550bps over bmk*
10-yr T-bond HU10YT=RR +14 basis points to +457bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1151 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Kuba Jaworowski.
Editing by David Brough)
