* Investors book profits after Friday's rally
* Poland trims Sept debt issuance; bonds flat
* Hungary's PPI slows to 6 pct y/y in July
(adds Polish Sept. debt supply)
By Marius Zaharia
BUCHAREST, Aug 31 (Reuters) - Central European currencies
eased on Monday as weak global markets prompted investors to
take profits after last week's rally, while Polish bonds failed
to react to plans to issue less debt in September.
Friday's rally was led by the zloty, which rose on Poland's
1.1 percent economic growth between April and June, double the
pace analysts expected and underlining the outperformance of the
region's largest economy [].
But at 1356 GMT, the zloty <EURPLN=>, the Czech crown
<EURCZK=>, Romania's leu <EURRON=> and Hungary's forint
<EURHUF=> were 0.1-0.3 percent weaker from the previous domestic
close in choppy trade as London markets were closed.
"Both Asian and U.S. markets seem weak, so investors stopped
taking risks for now," one Bucharest-based dealer said.
Polish bonds were flat as the country said it would offer up
to 12 billion zlotys in bonds and bills in September, down from
over 14 billion it sold in the previous month []. A
deputy finance minister told Reuters that Poland would continue
to trim debt issuance for the rest of the year. []
Analysts said lower debt supply, underpinned by
better-than-expected second quarter growth, may fail to impact
debt markets due to expectations that the central bank will halt
an easing cycle that began last year.
By contrast, Romania upped its debt issuance plans for
September to 6 billion lei from this month's 2.9 billion
[]. Romania also plans to issue a 0.5-1.5 billion
euro 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. []
Hungarian bonds were little changed from Friday.
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 was 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 Monday, Hungarian Prime Minister Gordon Bajnai won
support from socialist lawmakers on the draft 2010 budget, which
will cut spending further and is key to Hungary's IMF agreement.
[]
In the Czech Republic, Prime Minister Jan Fischer said he
would ask parliament to approve a fast-track savings package
ahead of the Oct. 9-10 election to cut next year's budget
deficit from an estimated 7.4 percent of GDP this year
[].
On Saturday, Romania revised its 2009 budget to meet the
conditions 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=> 25.39 25.366 -0.09% +5.37%
Polish zloty <EURPLN=> 4.095 4.089 -0.15% +0.49%
Hungarian forint <EURHUF=> 271.97 271.24 -0.27% -3.1%
Croatian kuna <EURHRK=> 7.36 7.352 -0.11% +0.07%
Romanian leu <EURRON=> 4.224 4.216 -0.19% -4.96%
Serbian dinar <EURRSD=> 93.28 93.26 -0.02% -4.07%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -28 basis points to 117bps over bmk*
4-yr T-bond CZ4YT=RR 0 basis points to +161bps over bmk*
#VALUE!
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +380bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +325bps over bmk*
10-yr T-bond PL10YT=RR -5 basis points to +284bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +4 basis points to +640bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +587bps over bmk*
10-yr T-bond HU10YT=RR +7 basis points to +499bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1656 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)
