April 20, 2018 / 10:00 AM / a month ago

CEE MARKETS-Bond yields track stronger Bunds, Serbian auction seen buoyant

    * Polish, Hungarian bonds track steepening Bund yield curve 
    * Investors ignore Hungarian wage data, CEE tension with
Brussels
    * Serbia's 2021-expiry bond auction seen drawing strong
demand

    By Sandor Peto
    BUDAPEST, April 20 (Reuters) - Long-term yields in some
Central European markets tracked a rise in euro zone peers on
Friday, while a 3-year bond auction in Serbia was expected to
draw strong demand.
    Germany's 10-year bond yield rose to an almost 5-week high
as a surge in oil prices increased inflation expectations.

    Polish and Hungarian bonds tracked a steepening Bund yield
curve.
    Poland's 10-year yield rose 2 basis points (bps) from
Thursday's close to 3.061, and Hungary's equivalent yield, at
2.49 percent, was 3 bps above Thursday's fixing.
    Hungary's advance was not linked with either gross wages
data which again showed double-digit annual growth or new
comments from Prime Minister Viktor Orban highlighting tension
with Brussels, market participants said.
    The surge in wages is unlikely to boost inflation in the
short term and lead to less loose central bank policy, analysts
said.
    Markets continue to ignore an East-West divide in the
European Union over differences in views about immigration and
the role of national governments, one Budapest-based fixed
income trader said.
    "We are yet to see if the jostling turns into a street
fight," the trader said.
    Hungarian Prime Minister Viktor Orban said on Friday that EU
leaders should not make sweeping decisions on migration before
next year's European Parliament elections.

    Hungary's forint eased 0.1 percent against the
euro by 0902 GMT, just like the zloty and the leu
, while regional stock markets were mixed. 
    The region's currencies are still near the 2-month highs
they reached by early this week as investors chose Central
European currencies and bonds instead of other emerging markets,
which were hit by jitters, like Russia and Turkey.
    The dinar firmed slightly to 118.05 ahead of an
auction of 3-year Serbian government bonds.
    Auctions this year often buoyed the dinar which has also
been strengthened by increased demand for lending, FDI inflows
and robust exports.
    The Serbian central bank repeatedly sold the currency which
remains resistant even though the bank last week surprised at
its second consecutive rate-setting meeting by reducing its
benchmark rate.
    "Although market demand at the debt auction is likely
to be good, strong RSD may raise more concerns with the
regulator (central bank) so a possibility of FX interventions
should not be ruled out," Raiffeisen analyst Gintaras Shlizhyus
said in a note.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1102 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.3350   25.3410    +0.02%    +0.82%
 crown      >                                       
 Hungary    <EURHUF=  310.5000  310.2500    -0.08%    +0.13%
 forint     >                                       
 Polish     <EURPLN=    4.1712    4.1685    -0.06%    +0.12%
 zloty      >                                       
 Romanian   <EURRON=    4.6612    4.6580    -0.07%    +0.40%
 leu        >                                       
 Croatian   <EURHRK=    7.4120    7.4125    +0.01%    +0.25%
 kuna       >                                       
 Serbian    <EURRSD=  118.0500  118.1200    +0.06%    +0.38%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1125.57  1128.100    -0.22%    +4.40%
                                       0            
 Budapest             38428.32  38663.10    -0.61%    -2.41%
 Warsaw                2329.49   2324.73    +0.20%    -5.35%
 Bucharest             8946.22   8952.47    -0.07%   +15.38%
 Ljubljana  <.SBITOP    839.09    836.81    +0.27%    +4.06%
            >                                       
 Zagreb                1791.83   1793.83    -0.11%    -2.77%
 Belgrade   <.BELEX1    740.23    739.80    +0.06%    -2.58%
            5>                                      
 Sofia                  662.95    662.79    +0.02%    -2.14%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.7730    0.0170   +132bps     +3bps
            R>                                      
   5-year   <CZ5YT=R    1.1920    0.0160   +121bps     +2bps
            R>                                      
   10-year  <CZ10YT=    1.7360   -0.0030   +115bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5360    0.0010   +208bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.3540    0.0090   +237bps     +1bps
            R>                                      
   10-year  <PL10YT=    3.0790    0.0330   +249bps     +4bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.95      1.04      1.18      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.10      0.18      0.03
                                                    
 Poland                   1.73      1.75      1.77      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto)
  
 
 
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