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CEE MARKETS-Bonds fall on hawkish Fed, Czech paper bucks trend
December 15, 2016 / 10:49 AM / 9 months ago

CEE MARKETS-Bonds fall on hawkish Fed, Czech paper bucks trend

* Bond yields track U.S. Treasuries higher on hawkish Fed
    * Romania rejects all bond auction bids, Serbia cuts offer
    * Czech bonds buck trend, exporters hedge any crown rise

 (Adds debt auctions in Bucharest and Belgrade)
    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, Dec 15 (Reuters) - Central European
government bonds mostly fell on Thursday, apart from
low-yielding Czech paper, after the U.S. Federal Reserve
signaled faster interest rate hikes in the world's largest
economy.
    Higher U.S. rates make the region's assets relatively less
valuable, although close links with the euro zone and healthy
economic growth make Central Europe less vulnerable than other
emerging markets.
    Pressure on regional bonds eased by the afternoon.
    Poland's 10-year bonds traded at a yield of 3.5255 percent, 
 7 basis points off the day's peak but higher by 8 basis points
from Wednesday's close. The corresponding Bund yield rose 5
basis points to 0.356 percent. 
    "Activity is low. There is no heavy beating due to the Fed,"
one fixed income trader said in Hungary, where the 10-year yield
rose 6 basis points to 3.37 percent.
    Currency markets were relatively calm as the Fed's shift
towards a more hawkish stance was not a big surprise after a
rise in long-term global yields amid expectations of higher
inflation in the United States under President Donald Trump.
    The zloty traded at 4.438 against the euro, weaker
by a quarter of percent, halving its early loss.
    The leu was flat but Romanian bonds eased. The
government rejected all bids at a tender of two-year bonds.
 
    The process of setting up a new government has yet to start
after Sunday's Romanian elections and there are concerns that
the budget deficit will exceed the target next year.
 
    Serbia sold fewer bonds than planned at its own auction.
  
    Ultralow-yielding Czech bonds firmed, bucking all EU
markets. Czech 2-year bonds were bid at a yield of -0.808
percent, down 6 basis points and below the corresponding Bund
yield.
    Czech bonds are supported by a stable economy and
expectations for a firming of the crown after the
Czech central bank (CNB) removes the cap which keeps the
currency weaker than 27 against the euro, planned for mid-2017.
    "There are flows into CZK assets still ... So far it is
still a favourable trade," one Prague-based fixed income trader
said.
    "Also the CNB is communicating that exporters should hedge
and that is what we see them doing. It now seems exporters are
coming and we expect more to come in early January."
    Exporters hedge their bets in forward deals which also
generate buying in the spot government bond market. 
    Regional stock markets were mixed. Warsaw's bluechip index
 fell 1.2 percent, retreating from Wednesday's 8-month
high.    
           CEE      SNAP   AT  1510       
           MARKETS  SHOT  CET         
                    CURRENCIES            
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                    bid   clos  chan  in
                          e     ge    2016
 Czech     <EURCZK  27.0  27.0   +0.  -0.0
 crown     =>        200   230   01%    8%
 Hungary   <EURHUF  312.  313.   +0.  0.62
 forint    =>       7000  8000   35%     %
 Polish    <EURPLN  4.43  4.42  -0.2  -4.0
 zloty     =>         80    64    6%    6%
 Romanian  <EURRON  4.52  4.52   +0.  -0.0
 leu       =>         21    25   01%    7%
 Croatian  <EURHRK  7.54  7.53  -0.0  1.31
 kuna      =>         00    55    6%     %
 Serbian   <EURRSD  123.  123.   +0.  -1.5
 dinar     =>       3500  4800   11%    2%
 Note:     calcula  prev  clos  1800      
 daily     ted      ious  e at  CET   
 change    from                       
                    STOC                  
                    KS                
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                          clos  chan  in
                          e     ge    2016
 Prague             908.  903.   +0.  -5.0
                      34    02   59%    2%
 Budapest           3131  3137  -0.2   +30
                    0.75  4.28    0%  .89%
 Warsaw    <.WIG20  1911  1934  -1.2   +2.
           >         .67   .87    0%   82%
 Buchares           6977  7009  -0.4  -0.3
 t                   .74   .51    5%    8%
 Ljubljan  <.SBITO  710.  711.  -0.1   +2.
 a         P>         28    11    2%   03%
 Zagreb    <.CRBEX  1966  1985  -0.9   +16
           >         .57   .74    7%  .39%
 Belgrade  <.BELEX  719.  719.   +0.   +11
           15>        90    46   06%  .77%
 Sofia     <.SOFIX  579.  582.  -0.6   +25
           >          05    97    7%  .63%
                    BOND                  
                    S                 
                    Yiel  Yiel  Spre  Dail
                    d     d     ad    y
                    (bid  chan  vs    chan
                    )     ge    Bund  ge
                                      in
 Czech                                spre
 Republic                             ad
   2-year  <CZ2YT=  -0.8  -0.0  -003  -5bp
           RR>        08     6   bps     s
   5-year  <CZ5YT=  -0.1  -0.0   +02  -5bp
           RR>         6    31  8bps     s
           <CZ10YT  0.53  0.00   +01  -3bp
 10-year   =RR>        5     9  9bps     s
 Poland                                   
   2-year  <PL2YT=  2.00  0.05   +27   +7b
           RR>         2     5  8bps    ps
   5-year  <PL5YT=  2.81  0.07   +32   +5b
           RR>         9     6  6bps    ps
           <PL10YT  3.54  0.08   +31   +5b
 10-year   =RR>              8  9bps    ps
           FORWARD  RATE  AGREEMENT       
                    3x6   6x9   9x12  3M
                                      inte
                                      rban
                                      k
 Czech     <CZKFRA  0.28  0.24  0.22     0
 Rep       ><PRIBO                    
           R=>                        
 Hungary   <HUFFRA  0.38  0.43  0.51  0.39
           ><BUBOR                    
           =>                         
 Poland    <PLNFRA  1.75  1.77  1.81  1.73
           ><WIBOR     5     5        
           =>                         
 Note:     are for                        
 FRA       ask                        
 quotes    prices                     
 *****************************************
 *********************
 
 (Reporting by Sandor Peto; Editing by Tom Heneghan)

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