* Polish output data better than forecast, PLN unfazed
* Hungary prices 1 bln euro 5-yr bond, in strong demand
By Marius Zaharia and Dagmara Leszkowicz
BUCHAREST/WARSAW, July 17 (Reuters) - Poland's zloty was
broadly unchanged after better-than-expected June output data
while the Hungarian forint pared earlier gains, made after its
first eurobond issue in a year sparked big foreign demand.
Poland's data showed industrial output fell 4.3 percent
year-on-year last month, while analysts had expected a fall at
6.2 percent. It also showed producer prices rose 4.0 percent in
June against a forecast of 3.5 percent.
Hungary priced a 1 billion euro, 5-year euro bond at 395
basis points over mid-swaps on Friday, tighter than the initial
guidance on Friday and the deal attracted orders worth 2.9
billion euros. []
The eurobond issue, which came after similar Czech and
Polish issues earlier this year, has been the latest indication
there is a revival in demand for debt in eastern Europe.
"The impact of the (Polish) data on both FX and FI markets
will be more limited. Retail sales from next week will be more
of a market mover," said Lars Christensen, chief analyst at
Danske Bank.
By 1323 GMT, the Polish zloty <EURPLN=> was up 0.02 percent.
The Czech crown <EURCZK=> was up 0.1 percent, while the Romanian
leu <EURRON=> had weakened by 0.2 percent.
One of the Polish government's officials said the data could
signal Poland's economy was recovering. []
However, "the zloty did not manage to go below 4.27 in the
past days so it may weaken in the short term, especially as it's
the end of the week - the time when investors traditionally
close their positions," said one Warsaw-based dealer.
Central and eastern Europe is underperforming other emerging
markets when risk appetite picks up, mostly because of worries
over currency devaluation in the Baltics and over a frail
banking sector burdened with foreign debt.
Also, help from the International Monetary Fund to countries
such as Latvia, Hungary and Romania came along with requirements
for tight fiscal policies which will weigh on any potential
recovery of those economies.
BONDS SELL WELL
The Hungarian forint gained slightly more than its peers
early on Friday, boosted by a well-bid eurobond issue and the
success of Thursday's domestic debt auctions. The unit pared
gains later in the day.
Although worries about the region's vulnerability remain
high, with the recent wage data giving another example of the
economic pain emerging Europe is feeling [],
sentiment was boosted by successful debt auctions in Poland and
Hungary this week.
"Firstly, the very strong demand for the HGBs (Hungarian
bonds) underlines that the local market is potentially very long
cash while the highest yields in the region are attracting
non-resident interest too," UniCredit said in a note.
"Secondly, the successful eurobond issuance which is the
first from a country in CEE having an IMF program shows that
international markets are not any more closed for sovereign
issuers."
However, fiscal troubles in the region mean that higher
demand will likely be met be higher supply as well, it said.
"News flow from outside is quite OK, banks in the U.S. start
to make profit ... but on the other hand it is still too early
to say it's all over," one dealer in Bucharest said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.895 25.929 +0.13% +3.31%
Polish zloty <EURPLN=> 4.324 4.325 +0.02% -4.83%
Hungarian forint <EURHUF=> 274.29 274.44 +0.05% -3.92%
Croatian kuna <EURHRK=> 7.332 7.33 -0.03% +0.45%
Romanian leu <EURRON=> 4.241 4.232 -0.21% -5.34%
Serbian dinar <EURRSD=> 92.91 92.92 +0.01% -3.69%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -17 basis points to 115bps over bmk*
4-yr T-bond CZ4YT=RR 0 basis points to +162bps over bmk*
8-yr T-bond CZ8YT=RR +3 basis points to +301bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -10 basis points to +380bps over bmk*
5-yr T-bond PL5YT=RR -10 basis points to +307bps over bmk*
10-yr T-bond PL10YT=RR -10 basis points to +279bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -29 basis points to +735bps over bmk*
5-yr T-bond HU5YT=RR -68 basis points to +648bps over bmk*
10-yr T-bond HU10YT=RR -56 basis points to +540bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1523 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia and
Dagmara Leszkowicz; Editing by Ruth Pitchford)
