* FX retreats, bond yields just up on weaker global tone
* Fitch sees higher debt in region
(Adds bonds, quotes, updates market)
By Krisztina Than and Marton Dunai
BUDAPEST, Sept 21 (Reuters) - Central European currencies
retreated slightly on Monday after last week's gains and yields
also ticked up as global appetite for risk eased, while Fitch
issued a warning on debt levels in the region.
Fitch said in a report that the region's economies could run
up bigger public debts as public finances remain shaky and
elections across the region raise risks. []
The Czech crown <EURCZK=> shed about 0.4 percent ahead of a
rate meeting there on Thursday, when the central bank is
expected to leave rates steady at 1.25 percent. []
The Polish zloty <EURPLN=> was also 0.4 percent lower at
0920 GMT and Hungary's forint <EURHUF=> fell 0.25 percent. The
Romanian leu <EURRON=> was steady.
"A series of domestic macro-figures including the important
retail sales (scheduled for Wednesday) should bring more
positive news supporting the Polish recovery story," KBC said.
"Nevertheless if the zloty fails to appreciate both the
domestic and core markets supporting trends, it could create the
room for a more significant short-term (negative) correction."
The region has benefitted from the rally in investors
appetite for stocks and other riskier assets since March but
have begun to diverge more now on differences in the local
interest rate outlook, politics and fiscal conditions.
Of the region's EU members, Hungary is expected to run the
highest debt, but that is where the government runs the tightest
budget in the face of the crisis, Fitch noted.
In Poland, the zloty is seen weighed down by expectations
for large corporate dividend payouts, adding to concerns over a
doubling of its budget deficit next year that have hurt its bond
markets.
"Big outflow and exchanges of dividend funds continues to
hang over the market," BRE Bank wrote in a note. "We expect a
wider range for the zloty today of 4.10-4.14 against the euro."
Polish unemployment and retail sales, due out on Wednesday,
should show the state of private consumption, a key driver of
growth.
Stock markets across the region were mostly lower as well,
with Budapest <> down 1.76 percent, Prague down 0.8 percent
and Warsaw 0.1 percent higher at 0941 GMT.
BOND YIELDS HIGHER
Bond markets tracked currencies in retreat, and yields were
mostly slightly higher after recent price gains. Yields rise as
prices fall.
In Hungary, the market looked ahead to a government bond
auction <HUISSUE> on Thursday, where the offer has been raised
in line with a very bullish market last week.
"We'll have an auction this week, but there seems to be no
clear expectation on the market," a bond trader in Budapest
said. "Together with the forint, we are more likely to weaken."
Finance Minister Peter Oszko also said on Friday that
Hungary would probably issue about 1 billion euros worth of
eurobonds in the first half of 2010. []
Czech bonds were mostly quiet, with the yield on the
government 10-year ticking up around 10 basis points.
Dealers said markets were keeping a cautious eye on budget
talks. []
"It seems political parties are not keen to compromise," a
fixed income dealer said, adding unwillingness to cut the budget
could build pressure on the long end of the curve.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.2 25.111 -0.35% +6.16%
Polish zloty <EURPLN=> 4.149 4.134 -0.36% -0.82%
Hungarian forint <EURHUF=> 271.68 271.00 -0.25% -2.99%
Croatian kuna <EURHRK=> 7.287 7.293 +0.08% +1.07%
Romanian leu <EURRON=> 4.263 4.262 -0.02% -5.83%
Serbian dinar <EURRSD=> 93.26 93.199 -0.07% -4.05%
All data taken from Reuters at 1130 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR 0 basis points to +199bps over bmk*
7-yr T-bond CZ7YT=RR -7 basis points to +170bps over bmk*
10-yr T-bond CZ10YT=RR +1 basis points to +169bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +381bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +341bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +181bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +601bps over bmk*
5-yr T-bond HU5YT=RR +3 basis points to +523bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +442bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1118 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Krisztina Than; editing by Patrick Graham)
