* Budget news hits Polish markets, debt supply eyed
* Other CEE assets rise with peers on G20 pledges
(Adds IMF comments in Hungary, Romania T-bills tender)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, Sept 7 (Reuters) - Polish bonds and the
zloty weakened on Monday after weekend news the country's budget
deficit was expected to double next year, while stocks rallied
with peers.
In Poland, Finance Minister Jacek Rostowski told a newspaper
in an interview released after markets closed on Friday that the
government's 2010 draft budget envisages a shortfall of 52.2
billion zlotys, double this year's plan. []
The news, along with expectations that the central bank was
at the end of its monetary easing cycle, pushed bond yields up
5-7 basis points along the curve.
"Prices fell slightly after the announcement on the deficit.
But I don't see a panic sell-off now," said Pawel Bialczynski, a
dealer at BRE bank in Warsaw.
On Monday, Poland also said 2010 borrowing needs will rise
to 203.8 billion zlotys and that it will boost foreign debt
issues [], but bonds showed no reaction.
Other currencies were stable and the region's stock markets
gained around 2 percent, with the exception of Prague, as
riskier assets found support from G20 promises to keep economic
stimuli going. [] []
Poland also said on Monday it will offer up to 2 billion
zlotys in five-year bonds on Wednesday, but analysts said prices
may suffer because of the worsening budget plan [].
"Prices at Wednesday's tender are likely to be lower than at
the previous auction," said Grzegorz Maliszewski, chief
economist at Millennium Bank.
At an Aug. 12 tender the minimum price was 1,006.70 zlotys.
On currency markets, the zloty <EURPLN=> lost 0.2 percent by
1406 GMT. The Romanian leu <EURRON=> and the Czech crown
<EURCZK=> were steady, with the latter ignoring
better-than-expected July foreign trade data. []
The Hungarian forint <EURHUF=> was stronger, while bond
yields fell about 4-5 points across the curve, dipping below the
psychological barrier of 8 percent on the short end as rate cut
expectations continue to support shorter maturities.
The International Monetary Fund and the European Union,
which lent Hungary $25.1 billion last October, said better
global conditions and government reforms have created room for
rate cuts. [].
Hungary has met the terms of its IMF/EU loan and has reached
agreement with the Fund to extend access to its existing loan
package by six months until October 2010, its finance minister
said [].
EURO PROBLEMS
Central European governments have been battling an economic
slowdown that has raised joblessness and cut state revenue.
Poland, the region's largest economy, has so far avoided the
economic contraction facing its export-heavy neighbours.
The country had spent years cutting back its core public
sector shortfall to less than the 3 percent of gross domestic
product ceiling needed to join the euro. The figure given by
Rostowski is just over 4 percent of 2008 nominal GDP, which has
mostly ended hopes Poland can join the euro zone by 2012.
Asked about the impact of the 2010 deficit plan on Poland's
euro hopes, central banker Dariusz Filar said 2013 was the
earliest possible date for adopting the common currency.
Elsewhere in the region, Slovakia's auction of 6-year state
bonds attracted the highest demand in over eight months on
Monday, but the country pushed for lower costs [].
Romania rejected all bids at a tender to sell 1-year T-bills
on Monday, indicating yields were too high [].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.445 25.472 +0.11% +5.14%
Polish zloty <EURPLN=> 4.096 4.088 -0.2% +0.46%
Hungarian forint <EURHUF=> 271.44 272.5 +0.39% -2.91%
Croatian kuna <EURHRK=> 7.331 7.332 +0.01% +0.46%
Romanian leu <EURRON=> 4.242 4.245 +0.07% -5.37%
Serbian dinar <EURRSD=> 93.139 93.31 +0.18% -3.93%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -9 basis points to 137bps over bmk*
4-yr T-bond CZ4YT=RR +3 basis points to +158bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +6 basis points to +403bps over bmk*
5-yr T-bond PL5YT=RR +7 basis points to +337bps over bmk*
10-yr T-bond PL10YT=RR +7 basis points to +291bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +642bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +581bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +494bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1706 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 Andy Bruce)
