* Global risk aversion drives FX lower despite improved PMI
* Forint lags as Hungary PMI dips, Polish, Czech improves
* Czech bonds down after issuance plan
(Adds fresh quotes, prices)
By Marton Dunai and Dagmara Leszkowicz
BUDAPEST/WARSAW, Sept 1 (Reuters) - Hungary's forint
regained some of its previous losses on Tuesday after local
manufacturing index dipped, while the Polish and Czech reading
improved in August amid continuing global risk aversion.
The forint <EURHUF=> was some 0.3 pct lower at 1407 GMT
after it had lost more than one percent from Tuesday's open as
Hungary's Purchasing Manager Index (PMI) slipped to 45.8 from a
July reading of 49.2.
In the same time the Polish zloty <EURPLN=> was almost
unchanged compared to the previous close, while the Czech crown
<EURCZK=> slipped 0.3 percent despite improved PMI figures,
which neared the 50 point threshold, indicating a pickup in
manufacturing there as well.
On global markets, the environment was not supportive for
emerging market assets. European and regions' stocks were most
in the red with only Prague's PX <> moving around its closing
levels.
"We must wait for the real, hard indicators, especially on
core markets, to know when we can break out of current ranges in
the Eastern European region," a dealer in Budapest said. "I
expect that to happen on the weak side."
Technical resistance levels have prevented currencies from
significant weakening, but the region needs more positive news
flow to remain on a strengthening path, another dealer said.
The Polish finance ministry, in a widely watched report,
estimated August inflation in Poland at 3.7 percent, near the
July reading of 3.6 percent. []
In Prague and in Budapest, markets have started watching
2010 budget negotiations as well.
"At this stage it seems that the market is not paying too
much attention to a substantial increase in budget deficit,"
said Piotr Matys, analyst at 4Cast in London.
"However, if the next government fails to address the
problem, it could potentially weigh on the Czech koruna."
Elsewhere in the region, Romania's leu <EURRON=> was
relatively stable after a GDP breakdown that showed Romania's
economy showed signs of bottoming out, with industry recording
small quarterly gains. []
BONDS EYE ISSUANCE PLANS
The Czech finance ministry announced it would sell 12
billion crowns of state bonds in October, roughly the same as in
September but a little below market expectations.
But the country's bonds weakened due to the negative market
sentiment, ignoring the debt plan which could bode well for
prices going ahead. []
Polish bonds were stable after the Finance Ministry's
inflation forecasts and analysts said investors already await
the debt supply for the fourth quarter, due end-September.
Hungarian bonds moved sideways in slow trade despite the
forint weakening.
"The three-month Treasury bill auction was better than
expected. (Central bank) interest rate cut expectations remain
strong... but turnover in government bonds is very low," said
one Budapest-based dealer.
"Looking ahead, the short end of the yield curve can remain
strong, but the long end lacks power... Sentiment may turn
slightly worse, long yields can go higher, while short yields
are kept lower by the rate cut expectations.
The Hungarian government's debt agency AKK sold 40 billion
forints worth of three months t-bills at an auction.
[]
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.514 25.435 -0.31% +4.86%
Polish zloty <EURPLN=> 4.093 4.094 +0.02% +0.54%
Hungarian forint <EURHUF=> 272.87 272.156 -0.26% -3.42%
Croatian kuna <EURHRK=> 7.346 7.36 +0.19% +0.26%
Romanian leu <EURRON=> 4.225 4.224 -0.02% -4.98%
Serbian dinar <EURRSD=> 93.051 93.28 +0.25% -3.84%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +24 basis points to 143bps over bmk*
4-yr T-bond CZ4YT=RR +1 basis points to +164bps over bmk*
#VALUE!
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +384bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +273bps over bmk*
10-yr T-bond PL10YT=RR -5 basis points to +279bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -25 basis points to +639bps over bmk*
5-yr T-bond HU5YT=RR -62 basis points to +592bps over bmk*
10-yr T-bond HU10YT=RR -51 basis points to +501bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1607 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Marton Dunai and Dagmara Leszkowicz)
