* Poles sell less in 5-yr tender, yield up
* Diverging econ/fiscal paths open new trades
(Adds new quotes, prices))
By Jason Hovet
PRAGUE, Sept 9 (Reuters) - The Polish zloty extended losses
on Wednesday, weighed down by lingering budget concerns and
retreating with other central European currencies even as stock
markets recovered from earlier lows.
The zloty <EURPLN=> lost 0.5 percent to 4.11 to the euro by
1416 GMT, and Hungary's forint <EURHUF=> dipped 0.4 percent to
the weak side of 270.85 per euro. Romania's leu <EURRON=> lost
0.1 percent.
"Since the zloty did not manage to go (through) 4.08 to the
euro, it is falling now and its current weakening could be
boosted by worries over next year's budget gap," said Jakub
Wiraszka, dealer at BRE bank in Warsaw.
The Poles sold fewer bonds than a month ago at a 5-year bond
tender on Wednesday -- its first debt sale since the government
said it expected the 2010 budget deficit to double. The yield
was up nearly 20 basis points compared with the previous tender.
[]
Yields rose some 3-5 basis points across the curve after the
tender.
"The market clearly signalled it is pricing in bigger
supplies next year and is not keen to buy papers at such a high
price," said one fixed income dealer at Warsaw-based bank.
Bonds had taken the brunt of the budget impact on Monday,
jumping around 7 basis points along the curve on debt supply
worries and reversing a rally over the summer months.
DIVERGING VIEWS
Signs of a better global economic outlook have boosted
emerging assets such as those in central Europe, while the U.S.
dollar has dropped to a year low as investors shunned it for
gold. Dealers said markets would take further clues from the
dollar's direction. []
Central European stocks mostly snapped this week's winning
streak, edging down slightly <> <>, with only Warsaw
<> reaching positive ground, as investors paused from a
rally in riskier assets that has benefitted the region.
The Czech crown <EURHUF=> gained back early losses, lifted
by spillover from the dollar losses. It was at an 11-month high
versus the dollar <CZK=>
"That's really the main story right now, just to be short
dollars," a dealer said.
Dealers said the Polish budget impact could start being felt
more on the zloty as appetite for riskier assets wanes, and
markets are starting to look at more cross trades in the region.
"The question of (the Polish) deficit is obviously negative
news which works against the zloty and in favour of the
Hungarian forint," said a Warsaw trader, adding an attraction
was the forint's higher yield -- with Hungarian rates at 8
percent compared to Poland's 3.5 percent.
Analysts generally see an end to rate cuts in Poland and the
Czech Republic, while, with the highest rates in the European
Union, Hungary and Romania are seen easing going into next year.
"Normally news of cuts would weaken the forint but analysts
say there's value in going long," a Budapest dealer said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.408 25.479 +0.28% +5.29%
Polish zloty <EURPLN=> 4.108 4.087 -0.51% +0.17%
Hungarian forint <EURHUF=> 270.85 269.74 -0.41% -2.7%
Croatian kuna <EURHRK=> 7.335 7.333 -0.03% +0.41%
Romanian leu <EURRON=> 4.246 4.241 -0.12% -5.45%
Serbian dinar <EURRSD=> 93.03 93.13 +0.11% -3.82%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR 0 basis points to 193bps over bmk*
7-yr T-bond CZ7YT=RR +11 basis points to +192bps over bmk*
10-yr T-bond CZ10YT=RR -6 basis points to +174bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +406bps over bmk*
5-yr T-bond PL5YT=RR -6 basis points to +339bps over bmk*
10-yr T-bond PL10YT=RR -7 basis points to +284bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -4 basis points to +641bps over bmk*
5-yr T-bond HU5YT=RR -6 basis points to +566bps over bmk*
10-yr T-bond HU10YT=RR -6 basis points to +480bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1516 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)
