* Czech yields at record lows after FinMin cuts debt plan
* FX up, forint firms on fiscal plan
* Polish bonds touch stronger after governor's comments
(Adds Czech FinMin on debt plans, updates prices)
By Jana Mlcochova and Dagmara Leszkowicz
PRAGUE/WARSAW, Sept 10 (Reuters) - Czech long-term bond
yields hit fresh record lows on Friday after the Finance
Ministry told Reuters it had cut next year's debt issuance plan
and reiterated it would focus on shorter-term debt.
Central European currencies were all in positive territory,
with Hungary's forint leading gains, and dealers said the unit
was likely to continue firming on the back of the government's
ambitious deficit-cutting plans.
The nine-year Czech bond <CZ1002471=> was quoted with a
yield of 3.087/3.000, a new record low, and 19 basis points down
from Thursday's close.
"I think it is because of three elements: the low repo rate,
the elevated demand for long-term assets cause by the change in
expectations for the 2011 issuance plan, as well as a thin
fourth-quarter issuance calendar," a Prague based dealer said.
Czech Finance Minister Miroslav Kalousek told Reuters on
Friday that the ministry had cut its estimate for 2011 gross
borrowing needs to 250-270 billion crowns from 305.7 billion
previously. []
He also reiterated the ministry planned to cut debt
servicing costs by 4 billion crowns from 78 billion planned for
next year by issuing short-term debt and bonds with floating
coupons, which dealers said took pressure off the long end of
the curve.
Hungarian bond yields dipped further on Friday, extending a
decline since the government said on Wednesday it was committed
to slashing its budget deficit to the European Union ceiling of
3 percent of GDP next year.
"Yields went down quite a lot very quickly in the last two
days," a dealer said in Budapest. "But there are no clear
positions, so moderate flows can generate substantial swings."
"We have priced in the promise of a 3 percent of GDP deficit
for next year, but further gains are not justified until we know
details of the programme that will make that happen. It's hard
to put a price tag on the changes until then."
Budapest's announcement on the deficit on Wednesday was a
U-turn for Prime Minister Viktor Orban's government, which had
for months turned its back on outside aid and eschewed budget
austerity.
But months of communication gaffes and attempts to wiggle
out of commitments by Orban's cabinet mean markets will retain
some scepticism until they see concrete steps, analysts say.
[].
By 13.04 GMT, Hungary's forint <EURHUF=> was 0.2 percent
stronger at 283.9 per euro, and dealers said the next key level
for the currency is around 282.50.
"If the Swissie and the dollar remain calm and there are no
botched comments from the Hungarian government, the forint can
slowly edge toward 280, probably toward the end of next week,"
one Budapest-based dealer said.
The Polish zloty <EURPLN=> rose 0.8 percent against the
euro, while the Czech crown <ERUCZK=> and Romanian leu <EURRON=>
gained 0.1 percent and 0.4 percent, respectively.
The forint has fallen 5 percent this year whereas the Czech
crown <EURCZK=> has gained nearly 7 percent and the Polish zloty
<EURPLN=> has risen 4.3 percent.
CBANKER LIFTS POLISH BONDS
Polish bonds were a touch stronger after central bank
Governor Marek Belka said he did not expect a big jump in
inflation and that the consumer price index was likely to reach
the central bank's 2.5 percent target and then stabilise early
next year. []
"The market is a touch stronger after Belka's comments,"
said Krzysztof Izdebski, fixed income dealer at PKO BP.
Inflation in July slowed to 2.0 percent on an annual basis
but analysts expect it to accelerate to around 2.7 percent at
the end of 2010 due to higher food prices and base effects.
Data released on Friday showed inflation slowed to 3.7
percent on an annual basis in Hungary last month, while in
Romania it quickened to 7.6 percent, but the readings had
limited impact on currencies. [] []
Yields were unfazed by data showing a
much-wider-than-forecast Polish current account deficit in July.
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.66 24.697 +0.15% +6.72%
Polish zloty <EURPLN=> 3.931 3.967 +0.92% +4.4%
Hungarian forint <EURHUF=> 283.83 284.5 +0.24% -4.75%
Croatian kuna <EURHRK=> 7.283 7.273 -0.14% +0.36%
Romanian leu <EURRON=> 4.272 4.257 -0.35% -0.81%
Serbian dinar <EURRSD=> 104.75 105.42 +0.64% -8.47%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 100bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +74bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +86bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +394bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +382bps over bmk*
10-yr T-bond PL10YT=RR -5 basis points to +310bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -5 basis points to +605bps over bmk*
5-yr T-bond HU5YT=RR -7 basis points to +564bps over bmk*
10-yr T-bond HU10YT=RR -5 basis points to +467bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1507 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus; Writing by Dagmara Leszkowicz;
Editing by Toby Chopra and Susan Fenton)
