* Polish bonds pressured after govt financing plan
* Stocks slide, Erste earnings hurt by Romania, Hungary
* Crown off 20-month high, cbank eyed next week
(Adds stocks, Erste, updates prices)
By Kuba Jaworowski and Jason Hovet
WARSAW/PRAGUE, July 30 (Reuters) - Polish bonds weakened on
Friday on the back of an expected delay in Polish fiscal
consolidation and planned tax rise, while the zloty held firm
with other central European currencies.
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.
Poland will delay cutting its budget gap to the EU's 3
percent of GDP ceiling by a year to 2013 but its borrowing needs
will fall thanks to a planned $18 billion sell-off of state
assets, a document obtained by Reuters showed on Friday.
A source said late on Thursday that Poland's central
government budget gap in 2011 would be higher than what most
analysts had expected. The proposed plan is expected to be
approved on Tuesday. []
Poland is seen as a one of the EU's mosty dynamic economies
this year, but some analysts say the government is relying too
much on growth to reduce its deficit.
"We think the zloty may come under pressure a bit more, and
on fixed income this is negative for bonds, especially on the
long-end," Societe Generale strategist Esther Law said.
Prime Minister Donald Tusk also confirmed plans for a
temporary hike in value-added tax, which put pressure on bonds
as it raised expectations of monetary tightening this year.
Five- and 10-year bond yields rose 4-5 basis points,
widening the spread with German bunds by up 10 basis points. The
zloty <EURPLN=> was steady at 4.005 to the euro by 1457 GMT.
DEBT, DEBT
The crown <EURCZK=> was flat on the day at 24.75 to the
euro. Hungary's forint <EURHUF=> rose from earlier lows to bid
even at 284.47 and Romania's leu <EURRON=> retreated from a
three-week high to bid unchanged from Thursday.
Stock markets in the region lost 1-2 percent and followed
western peers lower.
Emerging Europe's No.3 lender Erste Group Bank <ERST.VI>
shares dropped the most in a month after it reported a
bigger-than-expected drop in second-quarter net profit. It said
business in Hungary and Romania will cast a pall over results in
the second half of the year. []
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 up to 10 basis
points on Friday after weak U.S. GDP data cut risk appetite.
Strong investor appetite in emerging markets this month 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.
"The upcoming meeting (on Aug. 5) could force the crown into
a correction," Komercni Banka analysts said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.755 24.766 +0.04% +6.31%
Polish zloty <EURPLN=> 4.005 4.006 +0.02% +2.47%
Hungarian forint <EURHUF=> 284.47 284.5 +0.01% -4.96%
Croatian kuna <EURHRK=> 7.233 7.243 +0.14% +1.05%
Romanian leu <EURRON=> 4.248 4.247 -0.02% -0.25%
Serbian dinar <EURRSD=> 106.2 106.14 -0.06% -9.72%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +7 basis points to 105bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +98bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +109bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +392bps over bmk*
5-yr T-bond PL5YT=RR +9 basis points to +372bps over bmk*
10-yr T-bond PL10YT=RR +9 basis points to +320bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +13 basis points to +602bps over bmk*
5-yr T-bond HU5YT=RR +12 basis points to +552bps over bmk*
10-yr T-bond HU10YT=RR +15 basis points to +458bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1701 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 Ron Askew)
