* FX weaker despite strong industry data
* Budget deficit worries, seasonal rise in imports weigh
* Yields fall at Hungary debt auctions
(Adds fixed income, debt auction)
By Marius Zaharia
BUCHAREST, Oct 7 (Reuters) - Hungary's forint led central
European currency losses on Thursday, with a correction of its
strong recent rally gathering speed ahead of budget data later
in the session despite strong industry and export figures across
the region.
Debt sold smoothly at auctions in Budapest, however, as
investors seek high-yielding assets in which to park the extra
liquidity pumped into the market by major economies.
The debt agency sold its planned 50 billion euros worth of
bonds, with yields falling 30-40 basis points on all three
papers from the last auction. []
Hungary posted a higher-than-expected trade surplus and
Czech manufacturing output exceeded forecasts in August,
suggesting a continued economic recovery, but the forint and the
crown failed to react. [] []
The forint has gained sharply in the last month as the
government promised budget deficit cuts for 2011, but the rally
lost some steam this week as markets gear up for next year's
budget details due to be announced next week.
Hungary's Economy Ministry also releases budget figures for
September later in the day, eagerly awaited by investors as they
will include the first instalment of the tax on financial
institutions and give a clearer indication of the government's
ability to cut the fiscal deficit this year and next.
At 1022 GMT, the forint <EURHUF=> was 0.6 percent weaker on
the day, while the crown <EURCZK=>, the leu <EURRON=> and the
Polish zloty <EURPLN=> were all down 0.1 percent.
"We are used to good industry and exports data," one dealer
in Bucharest said. "I'm not watching these sets of data, I'm
watching budget deficits, that's the most important thing."
Hungarian and Polish debt yields were slightly higher on the
secondary market, while stocks were slightly higher.
RISKS
In Romania, a jump in the leu following court approval on
Wednesday of a key pension reform bill, vital to keep its
International Monetary Fund deal on track, proved short-lived as
investors turned their eyes on new risks to the government's
austerity drive.
The fragile centrist government likely faces a tight
no-confidence vote at the end of the month, as well as a series
of other votes on key austerity moves in coming weeks.
Romania's industrial output also edged higher, tracking
regional peers, data showed on Thursday. []
The Bucharest trader said worries over large fiscal
imbalances in the region will not go away easily and pointed to
Romania's 300 million lei debt auction later in the day, which
is expected to fall short as investors demand higher yields than
the finance ministry's 7 percent self-imposed ceiling.
Another dealer also said a seasonal increase in energy and
retail imports is keeping corporate demand for euros high,
limiting room for currency gains.
The Czech Republic posted on Thursday a surprisingly sharp
30.1 percent year on year increase in imports in August, the
eighth consecutive rise.
The zloty and the crown have firmed 3.6 and 7.8 percent this
year respectively, but the forint and the leu -- economies with
weaker fundamentals -- are slightly weaker than late last year.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.422 24.405 -0.07% +7.76%
Polish zloty <EURPLN=> 3.96 3.957 -0.08% +3.64%
Hungarian forint <EURHUF=> 272.72 270.97 -0.64% -0.87%
Croatian kuna <EURHRK=> 7.315 7.315 0% -0.08%
Romanian leu <EURRON=> 4.268 4.265 -0.07% -0.72%
Serbian dinar <EURRSD=> 105.84 105.89 +0.05% -9.41%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to 88bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +101bps over bmk*
10-yr T-bond CZ9YT=RR -1 basis points to +110bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +381bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +358bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +319bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +543bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +507bps over bmk*
10-yr T-bond HU10YT=RR 0 basis points to +440bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1222 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
All data taken from Reuters at 0858 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;
Editing by Tim Pearce)
