(Adds details, fixed income)
PRAGUE, Sept 1 (Reuters) - The Hungarian forint led emerging
European currencies lower in early trade on Monday, slipping
nearly 1 percent after weekend political wrangling raised the
risk the Socialists' minority government could collapse.
The liberal Free Democrats, who left the Socialist-led
coalition in April, rejected the Socialists' tax cut proposals
over the weekend saying they were not realistic and did not
serve the interests of the country.
Hungary's Socialists will need Free Democrat votes to pass
the 2009 budget and tax laws.
"The political noise definitely doesn't help the forint," a
trader said. "But it still doesn't look like we're heading
towards early elections, which would be the riskiest scenario
from a market perspective."
By 0758 GMT, the forint <EURHUF=> was trading at 238.03 per
euro, 0.7 percent lower than Friday's domestic close, while
government bond prices dropped and yields rose by five basis
points along the yield curve.
"This is still not an all-out selling," one fixed-income
trader said. "Political wrangling has started, that's true, but
the rest (of market jitters) will come if we find that early
elections will be held and look at what the parties want to do."
In Poland, the zloty <EURPLN=> dipped 0.3 percent to 3.34
per euro and bonds firmed ahead of an inflation forecast
published by the finance ministry, with the market betting price
growth peaked last month.
Among other currencies, the Czech crown <EURCZK=> edged 0.1
percent down to 24.80 to the euro and the Romanian leu <EURRON=>
added 0.3 percent to 3.515 a euro ahead of economic growth data
due Monday.
The Serb dinar <EURRSD=> edged up a touch to 76.16 a euro
and Croatia's kuna <EURHRK=> was steady at around 7.148 per
euro.
Central and eastern European currencies have dropped since
hitting record highs in July, with tensions between Russia and
Georgia hurting sentiment in the region, while a euro zone
slowdown hurts the region's economic growth outlooks.
*************************MARKET SNAPSHOT************************
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.802 24.780 -0.09% +6.4%
Polish zloty <EURPLN=> 3.340 3.330 -0.30% +7.24%
Hungarian forint <EURHUF=> 238.030 236.400 -0.69% +5.86%
Croatian kuna <EURHRK=> 7.152 7.153 +0.01% +2.38%
Romanian leu <EURRON=> 3.515 3.527 +0.34% +1.82%
Serbian dinar <EURRSD=> 76.160 76.200 +0.05% +3.30%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +8 basis points to 6bps over bmk*
5-yr T-bond CZ5YT=RR +9 basis points to +11bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +34bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +4 basis points to +228bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +211bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +190bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +13 basis points to +484bps over bmk*
5-yr T-bond HU5YT=RR +14 basis points to +446bps over bmk*
10-yr T-bond HU10YT=RR +10 basis points to +367bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 0958 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Ruth Pitchford)
