BUDAPEST/WARSAW: Polish government bond prices gave up ground on Friday after economic output data dampened expectations that the central bank will cut interest rates next week.
The Polish central bank will discuss rates on Dec. 3 after surprising markets this month by keeping its 2 percent main rate on hold instead of continuing to cut it.
Central banks in Poland, Romania and Serbia have all trimmed rates further in the past months to fight an economic slowdown, helping to push the region's government bonds to record lows.
Third-quarter data confirmed on Friday that Poland's economy, the region's largest, grew by 3.3 percent in annual terms, driven by consumption and investments.
The Czech Republic revised its quarter-on-quarter growth figure to 0.4 percent from 0.3 percent. Hungarian data showed a robust 16.3 percent annual growth in third-quarter investments.
Poland's five-year government bond yield fell 3 basis points, but rose back to Thursday's close of 1.96 percent after the data.
"The data will be an argument for the hawkish wing of the MPC (central bank), proving that it should not cut any more, because the economy is doing well, especially in terms of domestic demand," said Raiffeisen Polbank analyst Michal Burek.
Hungarian government bonds retained their gains, with the yield on 10-year papers trading at a record low of 3.5 percent, down four basis points from an auction on Thursday.
The zloty, the forint and the leu each shed 0.1 percent against the euro by 1111 GMT and the Czech crown lost 0.2 percent.
The region's economies are performing better than the euro zone, where the prospect of the European Central Bank providing fresh stimulus has also helped asset prices in the EU's eastern wing.
Central European economies are energy importers and a global fall in energy prices cuts their costs. But the continuing decline in crude prices has also pushed the region's main equity indices into the red, driven by a drop in energy sector stocks.
The shares of Hungarian oil group MOL shed 2.5 percent. Poland's PBNiG fell 2.6 percent and copper producer KGHM dropped 1.4 percent.
"PGNiG is vulnerable to crude oil price fluctuations as it has invested in upstream projects, and the recent crude price fall will likely have a negative impact on its earnings," a Warsaw-based trader said.
"KGHM is affected by falling copper and silver prices. Investors are simply afraid they are going to fall further."
Romania's OMV Petrom shares fell 1.6 percent.
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