* Hungary's 3-year bonds draw demand after auction
* CHF loan conversion plans remain a worry in Poland,
* Dinar firms, central bank may intervene again
By Sandor Peto and Ivana Sekularac
BUDAPEST/BELGRADE, Oct 14 Short-term government
bonds rose in Central Europe on Friday as higher yields on the
region's paper compared to its western neighbours attracted
investors, although a possible U.S. interest rate rise left the
assets with an uncertain outlook.
Hungary's 3-year bonds traded at a yield of 1.33 percent at
0750 GMT, compared with -0.66 percent on Germany's corresponding
paper, while the 10-year yield was flat at 2.99 percent.
The 3-year yield was down 7 basis points from levels before
an auction on Thursday which drew huge demand.
"That bond is attractive as its yield had surged from 1.22
percent (in the last month)," one Budapest-based trader said.
That rise in yields came despite ratings agency Standard and
Poor's lifting the country back into investment grade on Sept.
16 in a surprise move.
Romania's 3-year yield was bid lower by 6 basis points at
1.49 percent, while its 10-year yield rose 3 basis points.
Risks of a rise in Polish government spending and Warsaw's
tension with Brussels over the rule of law have kept its bond
yields underpinned, however.
They rose 1-2 basis points along the curve, with 10-year
papers trading at 3.04 percent.
In both Poland and Romania, planned legislation on the
conversion of Swiss franc mortgages partly at the cost of banks
have also weighed on assets. Pressure on bonds is higher in
Poland, Raiffeisen analyst Imre Stephan said in a note.
Poland's financial regulator KNF said on Thursday that
Polish banks would face bigger than expected costs if a proposal
to make them return excessive currency conversion spreads
charged to clients becomes law.
Concerns over a Romanian bill on conversions, which
parliament is seen passing on Tuesday, knocked the leu
down to 3-month lows early this week.
Rating agency Fitch said on Thursday that Romanian banks
which have relatively large Swiss franc loan portfolios had set
aside sufficient reserves for possible conversion losses.
The leu was flat at 0844 GMT. The Bucharest bourse's index
touched an 8-week low, underperforming regional indices
which rose as higher than expected Chinese inflation data helped
Asian and European stocks rebound.
The dinar firmed 0.1 percent to 122.97 against the
euro, past levels where the central bank sold it in the market
on Wednesday to prevent a strengthening.
The bank did not cut its 4 percent benchmark rate on
Thursday, citing an uncertain monetary policy outlook in the
It could intervene again if the dinar does not stay in the
123-124 range, traders said.
Demand for the dinar has been boosted by mid-month VAT and
wage payments, but it is also buoyed by the government's fiscal
consolidation policies, traders said.
CEE MARKETS SNAPSHOT AT 1044 CET
Latest Previous Daily Change
bid close change in
Czech 27.0260 27.0225 -0.01% -0.10%
Hungary 305.5400 305.8050 +0.09 2.98%
Polish 4.2935 4.2920 -0.04% -0.83%
Romanian 4.5020 4.5022 +0.00 0.38%
Croatian 7.5060 7.5095 +0.05 1.77%
Serbian 122.9700 123.0900 +0.10 -1.22%
Note: calculated previous close at 1800
daily from CET
Latest Previous Daily Change
close change in
Prague 891.96 886.64 +0.60 -6.73%
Budapest 28246.89 28123.21 +0.44 +18.0
Warsaw 1733.21 1727.55 +0.33 -6.77%
Buchares 6866.78 6858.69 +0.12 -1.96%
Ljubljan 725.36 726.57 -0.17% +4.20
Zagreb 1974.93 1971.69 +0.16 +16.8
Belgrade 636.76 636.13 +0.10 -1.14%
Sofia 510.30 510.34 -0.01% +10.7
Yield Yield Spread Daily
(bid) change vs change
2-year -0.717 -0.033 -006bp -3bps
5-year -0.136 -0.011 +034b -2bps
0.338 0.01 +029b +0bps
2-year #VALUE! 0.018 #VALUE +2bps
5-year #VALUE! 0.036 #VALUE +3bps
#VALUE! 0.02 #VALUE +1bps
FORWARD RATE AGREEMENT
3x6 6x9 9x12 3M
Czech <PR 0.28 0.24 0.22 0
Hungary <BU 0.76 0.74 0.74 0.87
Poland <WI 1.76 1.725 1.74 1.72
Note: are for ask
(Additional reporting by Radu Marinas in Bucharest; Editing by