CEE MARKETS 2-FX, bonds stable; budget, rate worries remain

                                
 * Currencies stable, lack direction in early trade
                                
 * Poland's budget, Czech polls, Hungary's rates in focus
                                
 
  (adds fixed income, quotes, detail)
                                
 By Marius Zaharia
                                
 BUCHAREST, Sept 4 (Reuters) - Central European currencies
and bonds were stable on Friday, resisting budget worries in
Poland, poll woes in Czech Republic and prospects for rate cuts
in Hungary.
                                
 Currencies started to recover some ground on Thursday after
two days of falls, helped by rising stocks and a strong euro as
the European Central Bank kept rates on hold as expected.
                                
 At 0856 GMT, the Czech crown <EURCZK=> was 0.06 percent
weaker from the domestic close, the Hungarian forint <EURHUF=>
was 0.09 percent down, the Romanian leu <EURRON=> dipped 0.16
percent and the Polish zloty <EURPLN=> was a touch up.
                                
 Currencies lacked direction in quiet trade, but this week's
falls seemed to be enough for investors who returned to buying
regional assets despite a volatile environment, dealers said.
                                
 Poland's struggle to contain its budget deficit this year
and next to maintain public debt levels below the constitutional
ceiling continues to worry investors, but recent falls have made
the zloty more attractive for some players.
                                
 "Despite negative information on budget deficit next year,
some investors take this correction on EURPLN as a good moment
to enter long zloty position," analysts at BRE bank in Warsaw
wrote in a note.
                                
 A Polish central banker warned that quick zloty appreciation
over the summer was a risk for the region's largest economy but
also said that the bank considered a change of bias to neutral
from easing [ID:nL3358788].
                                
 Polish bonds were stable, in line with the region and the
markets awaited more details about the shape of a 2010 budget,
expected next week.
                                
 On Friday, deputy Finance Minister Dominik Radziwill was
quoted as saying that without revenues of 37 billion zlotys from
planned selloffs of state companies, public debt may exceed
constitutional ceilings.
                                
 
                                
 MARKETS CONFIDENT ON CZECH REP
                                
 In the Czech Republic, Prime Minister Jan Fischer said
parliamentary election will be held likely in early November,
after the Constitutional Court threw into doubt the Oct. 9-10
poll. [ID:nL4333530]
                                
 Poll woes may delay efforts to control a ballooning fiscal
gap, but markets seem to trust Czech policymaking. Party leaders
scheduled talks on the election impasse for Sunday night.
                                
 "It seems like financial markets remain fairly confident in
the quick fix of the latest political crisis," said trader
Frantisek Kanka from Komercni Banka.
                                
 In Hungary, central bank deputy Governor Ferenc Karvalits
said on Thursday the inflation and growth outlook gave room for
further monetary easing, but policy would remain cautious
[ID:nL3119999].
"I think in the near term we will see a little more
volatility and the forint will see more swings, primarily to
towards the weaker side," one Budapest-based dealer said.
                                
 Markets are preparing for a raft of inflation and trade data
across the region next week, as well as for debt auctions, key
to gauge investors interest in regional assets.
                                
 On Thursday, Hungary said it will cut the amount of
government bonds to be auctioned next week to 42 billion forints
from 55 billion [ID:nL3703594].
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>  25.583   25.568   -0.06%   +4.57%
Polish zloty     <EURPLN=>   4.122    4.124   +0.05%   -0.17%
Hungarian forint <EURHUF=> 273.93   273.68    -0.09%   -3.79%
Croatian kuna    <EURHRK=>   7.332    7.343   +0.15%   +0.45%
Romanian leu     <EURRON=>   4.244    4.237   -0.16%   -5.41%
Serbian dinar    <EURRSD=>  93.159   93.51    +0.38%   -3.95%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +24 basis points to  165bps over bmk*
4-yr T-bond   CZ4YT=RR   +1 basis points to  +155bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -6 basis points to  +390bps over bmk*
5-yr T-bond   PL5YT=RR    -2 basis points to  +324bps over bmk*
10-yr T-bond PL10YT=RR    -3 basis points to  +283bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -13 basis points to  +643bps over bmk*
5-yr T-bond   HU5YT=RR    -7 basis points to  +587bps over bmk*
10-yr T-bond   HU10YT=RR  -10 basis points to  +491bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1156 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 Andy Bruce)