* FX mixed, forint may be affected by new fiscal proposals
* Romania's politics weigh on leu
* Polish bonds stable after recent falls
(Adds fixed income, detail)
WARSAW, Oct 15 (Reuters) - Central Europe's currencies were
mostly weaker on Friday and dealers said Hungary's forint
remained vulnerable to further negative fiscal news.
To achieve tough deficit goals, Hungary's Prime Minister
Viktor Orban has announced a batch of new taxes hitting banking,
telecom, energy and retail sectors, but analysts said they may
hamper growth further ahead. []
"(The new taxes) are not good news for the forint, but the
currency has not reacted rapidly so far," said one Warsaw-based
dealer.
"I expect the forint to move in a wide range of 270-280
against the euro now, but if the prime minister pops up with
other similar ideas, a further sharp weakening cannot be ruled
out," he added.
Similarly, in Romania, the second-poorest member of the
European Union, investors are cautious about rising public
discontent over government austerity measures -- a key factor in
securing IMF-led help -- as well as a planned no-confidence
motion against the centrist coalition by the end of this month.
"Clearly the political situation is driving the leu," said
one trader in Bucharest. "Markets are looking at the no-
confidence vote."
By 0855 GMT, the forint <EURHUF=> was 0.2 percent weaker
against the euro, trading at 274.19, while Romania's leu
<EURRON=> edged up about 0.2 percent to the common currency. The
Czech crown <EURCZK=> and the Polish zloty <EURPLN=> eached
eased back 0.1 percent.
In Poland, Finance Minister Jacek Rostowski said on Thursday
that Warsaw's general government's deficit -- a wider measure
that includes shortfalls of local governments' and state
agencies' -- will be much higher than forecast, but should not
breach 8 percent of GDP.
The original forecast envisaged this year's deficit at 6.9
percent of GDP, but so far the news has not affected the zloty,
that strengthened significantly on Wednesday, breaching the key
level of 3.9180 to the euro.
Dealers said there's still a room for the currency to
appreciate further, although it may consolidate for some time
near 3.85 - the level on which the central bank's intervened in
April to weaken the currency.
Elsewhere, Czechs go to the polls on Friday and Saturday in
municipal and Senate elections, but analysts do not expect much
impact on financial markets or on the national political scene.
BONDS
Hungary's bonds extended their losses on Friday. Bond yields
are some 20-30 basis points higher compared to levels seen
before PM's comments that new savings in private pension funds
in 2010 and in the following year would be transferred into
state coffers.
In Poland, government paper was roughly stable and dealers
said they expected a further consolidation on the bonds market,
after 5-year paper lost some 10 basis points only this week on
higher-than-forecast inflation reading that boosted expectations
for quick rate hikes.
Polish consumer prices surprisingly jumped to the central
bank's 2.5 percent target last month, strengthening the view
that the central bank's Monetary Policy Council (MPC) will
decide to raise borrowing costs soon.
Analysts polled by Reuters expect the 10-strong body to
raise rates by the end of the year by a moderate 25 basis points
from a record low of 3.5 of the main rate.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.47 24.444 -0.11% +7.55%
Polish zloty <EURPLN=> 3.907 3.903 -0.1% +5.04%
Hungarian forint <EURHUF=> 274.35 273.74 -0.22% -1.46%
Croatian kuna <EURHRK=> 7.323 7.324 +0.01% -0.19%
Romanian leu <EURRON=> 4.273 4.282 +0.21% -0.83%
Serbian dinar <EURRSD=> 105.89 105.965 +0.07% -9.45%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -4 basis points to 91bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +102bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +106bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +4 basis points to +393bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +360bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +316bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +4 basis points to +555bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +523bps over bmk*
10-yr T-bond HU10YT=RR +7 basis points to +462bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1055 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz;
Editing by Toby Chopra)
