* Investors book profit after Friday's rally
* Poland to trim Sept, Q4 debt issuance; bonds fail to react
* Hungary's PPI slows to 6 pct y/y in July
(adds detail, fixed income data)
By Marius Zaharia
BUCHAREST, Aug 31 (Reuters) - Central European currencies
edged down on Monday as weak Asian markets prompted investors to
take profits after last week's rally led by the zloty, which
rose on Poland's higher-than-expected economic growth.
Data on Friday showed Poland, the region's largest economy
and the only one to have avoided recession, grew 1.1 percent
year-on-year between April and June, double the pace analysts
expected and buoyed by its larger consumer base. []
The data underlined the outperformance of Poland in the
region and built up expectations the Polish central bank was at
the end of monetary easing.
At 0931 GMT, the zloty <EURPLN=> was 0.3 percent weaker, the
Romanian leu <EURRON=> and the Hungarian forint <EURHUF=> were
0.1-0.2 percent down, while the Czech crown <EURCZK=> was flat.
"China's (shares) dropped more than 6 percent, so the region
is not feeling very well either," one dealer in Bucharest said.
In Poland, a deputy finance minister told Reuters the
government would lower its debt issues in September and later in
the year after several successful bond tenders ensured solid
liquidity and as the economic outlook improves. []
Polish bonds, which weakened on Friday at the shorter-end of
the curve after the GDP data, were unmoved by the announcement
and trading was chopped by a market holiday in Britain.
Hungarian bonds were also little changed on the day.
"There's a holiday in London so I expect the Monday session
to be calm," said one Warsaw-based dealer.
In comparison, Romania upped its debt issuance plans for
September to 6 billion lei from the 2.9 billion it sold this
month []. Romania also plans to issue a 0.5-1.5
billion euros eurobond later this year.
In Hungary, data showed producer prices up 6 percent on the
year in July, compared to 6.6 percent in June. []
BUDGET WOES
Analysts still see the region's widening budget gaps as one
of the main setbacks for eastern European markets, as
governments will be forced to tighten fiscal policies and thus
limit growth and delay a recovery.
Poland's Prime Minister Donald Tusk said on Friday the
budget deficit is still expected to rise next year, despite
improving GDP figures, and his centre-right government could
only aim to lower the budget deficit in 2011. []
On Saturday, Romania revised its 2009 budget to meet the
demands of a 20 billion euro IMF-led aid package. []
The government upped its deficit target to 7.3 percent of
GDP from a previous 4.6 percent, but because of a deeper than
expected economic contraction, this still implies spending cuts
of about 1 percent of GDP.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.355 25.366 +0.04% +5.51%
Polish zloty <EURPLN=> 4.102 4.089 -0.32% +0.32%
Hungarian forint <EURHUF=> 271.7 271.24 -0.17% -3%
Croatian kuna <EURHRK=> 7.36 7.352 -0.11% +0.07%
Romanian leu <EURRON=> 4.222 4.216 -0.14% -4.92%
Serbian dinar <EURRSD=> 92.71 93.26 +0.59% -3.48%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -25 basis points to 120bps over bmk*
4-yr T-bond CZ4YT=RR +2 basis points to +162bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +6 basis points to +388bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +327bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +287bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +13 basis points to +649bps over bmk*
5-yr T-bond HU5YT=RR +12 basis points to +599bps over bmk*
10-yr T-bond HU10YT=RR +9 basis points to +501bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1231 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 Chris Pizzey)
