* Zloty, forint higher again, other FX slightly up
* Polish bonds sell well, but Czech demand weak on long end
* Polish industry slips, CEE budgets watched
(Adds quotes, updates prices)
By Jason Hovet and Dagmara Leszkowicz
PRAGUE/WARSAW, May 20 (Reuters) - The Polish zloty and
Hungarian forint rose late on Wednesday, extending gains from
this week on increasing appetite for central European assets.
Investors have bought into emerging European assets more in
the past two months, lifting currencies several percent, adding
more than 20 percent gains to stock markets and raising demand
for the region's government bonds.
On Wednesday, Poland sold all of its planned offer of 10-
and 20-year bonds, but a Czech 15-year bond auction drew only
muted demand compared with sales of shorter-dated issues.
[] []
In Hungary the state debt agency AKK bought back short-term
bonds worth 16.1 billion forints, showing decreasing levels of
weekly repurchases this month in a sign the market is improving.
[]
Bond yields were little moved on Wednesday, but the zloty
<EURPLN=> as well as Hungary's forint <EURHUF=> was up 0.7
percent against the euro.
In the same time the Czech crown <EURCZK=> added 0.3 percent
by 1408 GMT.
The zloty and forint, which are down 23 percent and 15
percent since the end of June, have gained 3-4 percent this week
on hopes that the global economic downturn is past its worst.
"Technicals show the forint may retreat but it is in a
strengthening trend and I think in the next one or two months it
will go beyond 270 (to the euro)," said one Budapest-based
dealer. "This is not country-specific; the global mood drives
(firming)."
BUDGET WATCH
Polish industrial output fell in April 12.4 percent, more
than expectations for a 10.8 percent fall, giving more evidence
of the sharp slowdown in the region's largest economy.
"We're now in a situation where net exports will gradually
improve thanks to the weak zloty and maybe because of the
improvement in the (economic) situation in the euro zone," said
Piotr Kalisz, chief economist at Citibank Handlowy in Warsaw.
"On the other hand, domestic demand, both investment and
consumption, will have a negative impact."
In Romania the leu <EURRON=> was almost unchanged to the
common currency at 4.152 to the euro. But stock markets jumped
and dealers said shares would continue to be a main FX driver.
Strategists expect a pause in gains and even a return to the
depreciation seen earlier this year as the global downturn
erodes jobs in central Europe and hits state coffers.
Earlier this week, Hungary agreed a deal with the
International Monetary Fund and the European Union to let its
budget deficit rise to 3.9 percent of GDP after getting a $25
billion rescue last year.
Later on Wednesday, Romania is also expected to release a
revised report to the EU on the state of its economy, following
its IMF-led loan deal.
Finance Minister Gheorghe Pogea said on Tuesday there were
no plans to ask for more lenient conditions in its IMF deal.
Poland is set to amend its 18.2 billion zloty budget deficit
target in June or July, and many analysts see the actual full
year deficit at twice that. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.591 26.669 +0.29% +0.61%
Polish zloty <EURPLN=> 4.343 4.372 +0.67% -5.25%
Hungarian forint <EURHUF=> 275.8 277.6 +0.65% -4.44%
Croatian kuna <EURHRK=> 7.337 7.362 +0.34% +0.38%
Romanian leu <EURRON=> 4.152 4.15 -0.05% -3.31%
Serbian dinar <EURRSD=> 94.303 94.105 -0.21% -5.11%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -4 basis points to 157bps over bmk*
4-yr T-bond CZ4YT=RR -1 basis points to +187bps over bmk*
8-yr T-bond CZ8YT=RR +3 basis points to +272bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -7 basis points to +430bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +331bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +289bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -27 basis points to +850bps over bmk*
5-yr T-bond HU5YT=RR -60 basis points to +770bps over bmk*
10-yr T-bond HU10YT=RR -48 basis points to +649bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1506 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
Dagmara Leszkowicz; Editing by Ruth Pitchford)
