* Forint holds 3.8 pct Sept gain, largest since April '09
* Hungary bonds firm; further gains hinge on budget details
* Polish bonds rise on Q4 supply details
(Updates with Romania, Poland debt supply, fresh quotes)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, Sept 30 (Reuters) - Hungary's forint was
set for its biggest monthly gain since April 2009 ahead of
weekend local elections that could pave the way for the
announcement of spending cuts, while Polish bond yields dropped
on a cut in supply.
Emerging European currencies, bonds and stocks have mostly
firmed this month, led by the forint, and dealers said investor
appetite for assets from the region remained strong in the face
of worries about public debt in some euro zone countries.
The forint <EURHUF=> shook off the weaker euro/dollar,
trading 0.3 percent up at 276.33 to the euro by 1354 GMT, but
off Wednesday's four-month highs of 275.3. Hungarian bond yields
dipped 4-6 basis points.
"I would not expect the forint to break out of the 276-278
range before the weekend," one Budapest-based dealer said.
In the longer term, however, moves in the forint are
expected to depend largely on what the centre-right government
pulls out of its sleeve on the 2011 budget after Sunday's
municipal election. []
Ahead of the polls, the government has avoided detailing
cuts it might impose next year to meet a commitment to reduce
the deficit to a stringent 3 percent of gross domestic product.
"There will not be much excitement before the elections,
then we will see what happens, any hard news or figures on what
can be expected in the new budget will set the course for the
forint," the trader said.
Polish debt yields also dropped 3-4 basis points after the
finance ministry said it will offer 7-14 billion zlotys worth of
bonds in the fourth quarter, much less than in the third.
[]
The Polish zloty <EURPLN=>, the Romanian leu <EURRON=> and
the Czech crown <EURCZK=> were flat or a touch stronger.
The crown is trading about half a percent off a 22-month
high hit earlier this month, adding about 0.7 percent in
September overall. The forint has been the best performing
emerging European currency in September with a 3.8 percent rise.
WEEKEND POLL
Hungary's ruling Fidesz party has spooked markets since
sweeping April elections by comparing its debt problems with
those of Greece and suspending International Monetary Fund aid
talks.
"As we expect this to confirm the already announced
3 percent deficit target for 2011, we continue to recommend
constructive positions going into this period," UniCredit
analysts said.
SEB analysts said the stronger forint has weighed on the
zloty, which has dipped 1.7 percent in the past two weeks, also
hurt by some cooling of interest rate hike expectations.
Romania announced plans to issue 4.6 billion lei of debt in
October, a similar target to this month's, but more than double
the amount it actually sold. []
Analysts expect it to fail to meet its target again due to a
self-imposed yield cap of 7 percent, putting pressure on it to
accept generally higher yields.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.545 24.573 +0.11% +7.22%
Polish zloty <EURPLN=> 3.977 3.979 +0.05% +3.19%
Hungarian forint <EURHUF=> 276.33 277.14 +0.29% -2.16%
Croatian kuna <EURHRK=> 7.305 7.295 -0.14% +0.06%
Romanian leu <EURRON=> 4.268 4.269 +0.02% -0.72%
Serbian dinar <EURRSD=> 106.4 106.01 -0.37% -9.89%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +8 basis points to 88bps over bmk*
7-yr T-bond CZ7YT=RR -9 basis points to +91bps over bmk*
10-yr T-bond CZ9YT=RR -5 basis points to +105bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +393bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +362bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +326bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -11 basis points to +545bps over bmk*
5-yr T-bond HU5YT=RR -11 basis points to +503bps over bmk*
10-yr T-bond HU10YT=RR -11 basis points to +448bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1554 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Marius Zaharia; Editing by Patrick Graham)
