* FX mixed, forint vulnerable due to new fiscal proposals
* Romania's politics weigh on leu
* Polish bonds stable after recent falls
(Adds fixed income, detail)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, Oct 15 (Reuters) - Hungary's forint edged
lower on Friday as investors eyed the disclosure of further
details in a 2011 budget draft, likely to set the trend for
Hungarian assets for the rest of the year.
Prime Minister Viktor Orban's speech on his policy plans on
Monday is currently the most anticipated event in central Europe
and despite firm commitments to stick to tight budget deficit
targets, markets are wary about the way this could be achieved.
Earlier this week, Orban announced a batch of new taxes
hitting banking, telecom, energy and retail sectors, but
analysts said they may hamper growth and risk spooking investors
again. []
The most radical of the measures, a suspension of state
transfers to private pension funds, is particularly worrying for
investors and bond yields traded 20-30 basis points higher from
levels before the announcement.
"What ... (Orban) says on Monday, will certainly have an
impact on the market," one Budapest-based trader said.
"If the government enacts its plans about pension funds, I
can imagine further forint weakening as that would eliminate
part of the domestic buying side (in debt and stock markets)."
Hungarian assets took a heavy beating through the summer as
the government appeared to liken its debt problems to those of
Greece's and followed up with a suspension of talks with the
International Monetary Fund over its bailout deal.
But it has rallied sharply in September and added to gains
early this month -- albeit at a slower pace -- on bets for more
fiscal discipline after the Oct. 3 municipal elections which
consolidated Fidesz's hold on power.
The forint was trading 0.3 percent lower at 274.65 per euro
by 1357 GMT on Friday <EURHUF=>.
The most likely outcome of Monday's speech is more
volatility for Hungarian markets.
ROMANIAN POLITICS
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." The leu was up 0.1 percent on the day
<EURRON=>.
In Poland, Finance Minister Jacek Rostowski said on Thursday
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,
which strengthened significantly on Wednesday, breaching the key
level of 3.9180 to the euro.
The zloty had its biggest weekly gain against the euro since
the beginning of August, breaking resistance levels midweek. It
was 0.1 percent lower on Friday <EURPLN=>.
On Wednesday the euro triggered a bearish right triangle
formed by the 3.91 zloty level and the downtrend line linking
the highs going back to late August. The pattern targets the
3.80 level in coming weeks.
Dealers said there is still room for the currency to
appreciate further, although it may consolidate for some time
near 3.85 -- the level on which the central bank intervened in
April to weaken the currency.
Elsewhere, the Czech crown fell 0.3 percent <EURCZK=> ahead
of voting 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.
Polish bonds were stable after falling earlier this week due
to a higher-than-forecast inflation reading that boosted
expectations for quick rate hikes.
However, rate setter Elzbieta Chojna-Duch said the surprise
jump may be a one-off and the zloty's strength will be a factor
in the decision. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.526 24.444 -0.33% +7.31%
Polish zloty <EURPLN=> 3.906 3.903 -0.08% +5.07%
Hungarian forint <EURHUF=> 274.65 273.74 -0.33% -1.57%
Croatian kuna <EURHRK=> 7.332 7.324 -0.11% -0.31%
Romanian leu <EURRON=> 4.276 4.282 +0.14% -0.9%
Serbian dinar <EURRSD=> 105.95 105.965 +0.01% -9.5%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 94bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +95bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +103bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +394bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +369bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +317bps 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 1657 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; Editing by Toby Chopra/Ruth
Pitchford)
