* Hungarian long-term bonds extend loss on govt budget plan
* Romania's leu eases on no-confidence move vs govt
(Adds bonds, stocks)
BUDAPEST, Oct 19 (Reuters) - Eastern Europe's currencies
were mixed on Tuesday morning after Hungary's economic plan
failed to dispel investor concerns while a call for a
no-confidence vote in Romania added to local uncertainties.
The forint <EURHUF=> which fell past 277 to the euro on
Monday to its lowest level this month, traded at 275.69 at 0923
GMT, up 0.2 percent from Monday's closing level.
"The future path (of the forint) is uncertain as budget
targets seem secure but (its) long-term sustainability ... is
highly questionable," CIB Bank said.
Hungary gave more details on Monday of how it aims to fund
income tax cuts aimed at boosting domestic demand by imposing
large taxes on banks, energy firms and the telecoms and retail
sectors. []
Analysts said the scheme would ensure that Hungary meets its
near-term deficit-cutting targets but had doubts about the
longer term. They fear some of the measures could hurt economic
growth and the unorthodox approach could discourage investors.
"People in the market have two basic thoughts: on the one
hand they think the government will meet the deficit targets and
that's positive -- but the way they do it, the structure, is not
appropriate as it could hurt growth and raise inflation," an FX
dealer in Budapest said.
Concern that higher taxes in the 2010-2012 period will solve
the budget's problems only temporarily pushed long-term
Hungarian government bond yields further up.
The government also plans to rechannel new savings from
private pension funds into state coffers, a move that could cut
domestic demand for government bonds.
Ten-year yields rose 5 basis points from Monday to 5-week
highs at 7 percent. Hungary's main stock index <> -- which
fell last week after the government announced its new sectoral
taxes -- continued to recover. It rose 1.7 percent by 0949 GMT,
led by oil group MOL <MOLB.BU> which firmed 3.3 percent.
POLITICS WEIGH ON LEU
The Romanian leu <EURRON=> traded 0.2 percent weaker against
the euro after the leftist opposition filed a no-confidence
motion against the coalition government, with a vote scheduled
for next Wednesday.
"This brings a lot of uncertainty on the market," said one
dealer in Bucharest.
Analysts widely expect the government to survive the vote.
However, less than a year after taking power and unlocking
funds from an IMF bailout, Romania's fragile government faces a
deep crisis of confidence which could prevent it from delivering
the reforms needed to keep the money flowing. []
The Czech crown <EURCZK=> was steady at 24.49 in early
trade, staying near 23-month highs, while the zloty <EURPLN=>
firmed 0.1 percent to 3.921.
Investors in Poland are awaiting September industrial output
and producer price data due at 1200 GMT. Output is seen solid,
with PPI up again. []
Czech central banker Pavel Rezabek said on Monday the crown
rally was not a good thing for the economy, but reiterated
stable interest rates were needed. []
"The crown is very strong. If it were around 25, an interest
rate hike in the autumn would be simpler. (At current exchange
rates a hike) will not be before the first quarter 2011," Ceska
Sporitelna analysts said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.49 24.491 0% +7.46%
Polish zloty <EURPLN=> 3.921 3.926 +0.13% +4.67%
Hungarian forint <EURHUF=> 275.69 276.15 +0.17% -1.94%
Croatian kuna <EURHRK=> 7.322 7.332 +0.14% -0.17%
Romanian leu <EURRON=> 4.292 4.284 -0.19% -1.27%
Serbian dinar <EURRSD=> 105.86 105.91 +0.05% -9.43%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +4 basis points to 70bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +82bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +88bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +389bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +366bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +319bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -5 basis points to +542bps over bmk*
5-yr T-bond HU5YT=RR -6 basis points to +522bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +459bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1123 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Krisztina
Than/Sandor Peto; Editing by Ruth Pitchford, John Stonestreet)
