* Currencies fall, led by zloty
* Hungary seen cutting rates 50 bps, decision at 1200 GMT
(adds fixed income, Polish debt plans)
By Marius Zaharia
BUCHAREST, Sept 28 (Reuters) - The Polish zloty led losses
in Central Europe on Monday on the back of a fall in stocks
globally, with the Hungarian forint weaker ahead of an expected
50 basis point cut in central bank interest rates.
Hungary is seen easing rates to 7.5 percent on Monday in
what would be the third reduction in a row to fight a painful
recession [], highlighted by unemployment data
earlier in the day [].
The June-August 9.9 percent figure matched its highest on
record during the current crisis, and the peak since the third
quarter of 1996.
The forint <EURHUF=> traded at 269.87 per euro at 0856 GMT,
0.4 percent down from the previous domestic close.
"Given the dovish central bank (NBH) outlook we keep our
cautious stance on HUF as we continue to think that stronger
appreciation pressure would lead to stronger rate cuts and the
NBH still prefers a range of 265-280," UniCredit said in a note.
It said a "dovish outcome" should also help bonds,
particularly short-term ones, to extend last week's gains.
Romania is also seen cutting rates this week [],
while Poland is expected to hold fire [].
In Poland, the zloty <EURPLN=>, which was down 0.6 percent
to 4.226 at 0856 GMT, hit a fresh two-week low following stock
losses globally. Analysts also said fiscal woes as well as a
possible dividend payout from state insurer PZU, which could be
exchanged into euro, weigh on the unit.
Polish bonds were slightly weaker in line with the zloty,
which lost 0.6 percent on the day, while Hungarian paper moved
sideways ahead of the rate decision.
BUDGET WOES
Poland's public debt is expected to rise to 54.7 percent of
GDP next year, close to the constitutional ceiling of 55 percent
which will force it to significantly cut spending and present a
balanced budget, a news agency reported [].
In Czech Republic, the crown <EURCZK=> edged down as
domestic markets were closed for a holiday. On Friday, investors
were relieved to see the parliament approving a 2010 austerity
plan, removing the risk of a government collapse [].
In Romania, the leu <EURRON=> moved away from the key 4.2
per euro level, to which it firmed gradually last week on the
back of the International Monetary Fund approval of a second
loan tranche. It fell 0.3 percent in line with peers.
But a ballooning budget deficit, expected rate cuts and
political risks ahead of a presidential election in November
will prevent sharp gains for the currency, dealers said.
On Friday, data showed the budget deficit rose to 4.5
percent of GDP in the first eight months, widening by one
percentage point in a month [].
Markets were awaiting comments from policymakers, bankers
and corporate officials on the strength of a recovery in the
region at the Reuters Central and Eastern European investment
Summit from Sept. 28-30 [].
The region's second-largest lender, Raiffeisen International
<RIBH.VI> said non-performing loans will peak next year, and
that the bank started to ease credit conditions again in some
countries as currencies have stabilised [].
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.233 25.148 -0.34% +6.02%
Polish zloty <EURPLN=> 4.226 4.2 -0.62% -2.63%
Hungarian forint <EURHUF=> 269.87 268.91 -0.36% -2.34%
Croatian kuna <EURHRK=> 7.285 7.267 -0.25% +1.1%
Romanian leu <EURRON=> 4.21 4.196 -0.33% -4.65%
Serbian dinar <EURRSD=> 92.463 92.71 +0.27% -3.23%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -4 basis points to 167bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +183bps over bmk*
10-yr T-bond CZ10YT=RR -13 basis points to +176bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +386bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +338bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +293bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -7 basis points to +547bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +494bps over bmk*
10-yr T-bond HU10YT=RR -9 basis points to +430bps 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 Victoria Main)
