CEE MARKETS 2-Deficit weighs on Hungarian markets

                                
 * Currencies move little, euro periphery weighs on mood
                                
 * Forint, Hungary bonds ease on budget figures
                                
 * Czech CEZ to cut investments by $4.41 bln in 4 years
                                
 
                                
 (Recasts with new comments, prices)
                                
 By Marton Dunai and Sandor Peto
                                
 BUDAPEST, Nov 9 (Reuters) - The forint and Hungarian
government bonds eased on Tuesday as renewed concerns over the
euro zone periphery limited investors' appetite for risk
                                
 Markets are focusing on surging yields and debt insurance
costs in Portugal and Ireland. But domestic factors also weighed
on Hungarian markets after the government published
weaker-than-expected October budget figures late on Monday.
                                
 Hungarian government bond yields jumped 5 basis points (bps)
with 10-year paper trading at yields around 7.15 percent. Polish
yields rose 3 bps, with 10-year bonds quoted at 5.67 percent.
                                
 Traders said the strength of the Swiss franc against the
euro is also reminding investors of the financial stability
risks stemming from a huge amount of Swiss franc loans held by
Hungarian households.
                                
 "This has an impact on us," one Budapest-based bond trader
said. "(Also) yesterday's budget figures were very bad."
                                
 Hungary's budget deficit swelled to 131 percent of the
full-year target in October, but the government said its deficit
goal remained achievable as revenues in the remaining months of
the year would reduce the gap. [ID:nLDE6A721U]
                                
 The government's move to curb the Constitutional Court's
powers also highlights political risks, a dealer in Budapest
said. [ID:nLDE6A721U]
                                
 "Political uncertainty drags on the forint, as does the
stuttering economy," he said. "Any time there's a hiccup,
investors find us among the first. Plus, we base our recovery on
the euro zone, which is in trouble itself."
                                
 Most regional currencies were little changed, with the
forint <EURHUF=> and the Czech crown <EURCZK=> down 0.1 percent
against the euro by 1010 GMT to 274.76 and 24.568, respectively.
 Romania's leu <EURRON=> firmed 0.1 percent to 4.281, while
Poland's zloty <EURPLN=> was flat at 3.932.

                                
 GROWTH, INTEREST RATES
                                
 Hungary's central bank is expected to keep interest rates on
hold at 5.25 percent at least until the end of 2011, though the
government's tax measures have boosted inflation concerns.
                                
 In Poland too, a central banker said the bank should soon
start to hike its rate from 3.5 percent. [ID:nLDE6A80OW]
                                
 But a lower-than-expected October inflation reading in the
Czech Republic reinforced expectations for an interest rate hike
shifting further into the future. [ID:nLDE6A218E]
                                
 "(October inflation) result supports the view that interest
rates should certainly remain stable in the coming months, which
shifts the point of rate increase into the second half of the
next year," Patria Finance chief economist David Marek said.
                                
 The Czech central bank has recently cut its growth outlook
due to fiscal cuts and said its forecasts imply a rise in rates
in the second half of next year.
                                
 The region's largest listed company, Czech power group CEZ
<CEZPsp.PR> said on Tuesday it was cutting its investments by 78
billion crowns ($4.41 billion) over the next four years to focus
on the domestic market and combat persistently low power prices.

--------------------------MARKET SNAPSHOT--------------------
 Currency                    Latest   Previous Local    Local
                                
                                   close    currency currency
                                
                                            change   change
                                
                                            today    in 2010 
 Czech crown      <EURCZK=>   24.568   24.548  -0.08%   +7.12%
 Polish zloty     <EURPLN=>    3.932    3.933  +0.03%   +4.37%
 Hungarian forint <EURHUF=>  274.76   274.55   -0.08%   -1.61%
Croatian kuna    <EURHRK=>     7.353    7.349  -0.05%   -0.6%
Romanian leu     <EURRON=>     4.281    4.287  +0.14%   -1.02%
Serbian dinar    <EURRSD=>   107.02   106.913  -0.1%   -10.41%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -3 basis points to  58bps over bmk*
7-yr T-bond   CZ7YT=RR    0 basis points to  +95bps over bmk*
10-yr T-bond   CZ9YT=RR   +2 basis points to  +104bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +6 basis points to  +391bps over bmk*
5-yr T-bond   PL5YT=RR   +4 basis points to  +375bps over bmk*
10-yr T-bond PL10YT=RR   +5 basis points to  +329bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +6 basis points to  +571bps over bmk*
5-yr T-bond   HU5YT=RR   +8 basis points to  +538bps over bmk*
10-yr T-bond   HU10YT=RR +7 basis points to  +477bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1110 CET.
Currency percent change calculated from the daily domestic 
close at 1700 GMT.
                                
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 (Reporting by Reuters bureaux, writing by Marton Dunai/Sandor
Peto, editing by Sujata Rao)