* Czech crown little moved by easing industrial rut
* Hungarian, Polish bond yields dip further
* Most currencies head for 2nd straight monthly gain
(Adds bonds, details)
WARSAW, July 31 (Reuters) - Investors in central Europe
paused on Friday after a month of strong gains, with a smaller
than expected contraction in Czech output failing to prompt much
new optimism among investors.
At 0959 GMT, the Hungarian forint <EURHUF=>, up 2.3 percent
this month as investors began to return to its paralysed bond
markets, rose 0.3 percent.
The Polish zloty <EURPLN=>, leading the region with an
almost 7 percent jump in July, dipped 0.2 percent. Other
currencies traded close to levels from the previous close.
Investors in the region are weighing concerns about growth,
financing and budgets with signs of better economic performance
in some states. But the Czech crown <EURCZK=> was little moved
after the slide of domestic industry slowed to 12.3 percent
year-on-year in June, adding to expectations the central bank's
rate easing cycle may be at an end.
"Investors need to see clearer signs of improvement," said
CSOB trader David Sykora. "We are still having problems with
exports at low levels."
"We still have to watch things on a global scale," he added,
noting improving signs in the global economy still have many
investors on the fence.
Analysts said currencies were unlikely to move much before
when U.S. gross domestic product data for the second quarter at
1230 GMT, with optimism about corporate earnings and the pace of
a global recovery still the main drivers for the region's
emerging markets.
GOING UP
Yields in Polish and Hungarian debt continued to come down
on Friday morning with Budapest's government debt boosted by
successful debt auctions on Thursday, dealers said.
[]
In Poland yields fell by 2-3 basis points as the market
awaits government debt supply details for August due midday.
Hungarian yields dropped by up to 12 basis points, mostly on
the shorter end to flatten out the curve. The success of
auctions this month has brought hope that Hungary can ween it
off EU and IMF aid given under a bailout late last year.
"Yesterday's successful auctions were very positive news,
the yield curve above 8.70 percent is a definite buy," a trader
said. "I think this bullish sentiment could last for 1-2 more
months."
Interest rates in the region are still declining, with
central banks seeking to bolster growth without undermining
currencies which were battered by the worsening of the global
financial crisis last year.
On Monday the Hungarian central bank surprised with a bigger
than expected 100 basis point rate cut on Monday and Romania,
where an IMF mission is assessing its performance under a rescue
agreed in April, is expected to cut by a half point next week.
Poland left interest rates unchanged on Wednesday, while the
Czechs are seen doing the same at a meeting next Thursday.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.581 25.571 -0.04% +4.58%
Polish zloty <EURPLN=> 4.16 4.153 -0.17% -1.08%
Hungarian forint <EURHUF=> 266.00 266.66 +0.25% -0.92%
Croatian kuna <EURHRK=> 7.35 7.349 -0.01% +0.2%
Romanian leu <EURRON=> 4.207 4.202 -0.12% -4.58%
Serbian dinar <EURRSD=> 92.987 93.023 +0.04% -3.77%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +25 basis points to 143bps over bmk*
4-yr T-bond CZ4YT=RR -6 basis points to +164bps over bmk*
8-yr T-bond CZ8YT=RR +9 basis points to +282bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +363bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +295bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +274bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -7 basis points to +685bps over bmk*
5-yr T-bond HU5YT=RR -3 basis points to +607bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +527bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1201 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
(Reporting by Reuters bureaus, writing by Kuba Jaworowski;
editing by Patrick Graham)
