April 26, 2018 / 9:21 AM / 4 months ago

CEE MARKETS-Bonds, currencies rebound ahead of ECB, dollar still watched

    * Assets rebound as US yield rally loses steam
    * Hungarian bond auction could draw strong demand-trader
    * ECB worry on economy could weaken currencies-analysts

    By Sandor Peto
    BUDAPEST, April 26 (Reuters) - Central European government
bonds and currencies regained some ground as a rally in U.S.
Treasuries yields and the dollar lost steam, ahead of an
expected decision by the European Central Bank to keep policy
unchanged at its monetary meeting on Thursday.
    Regional currencies and bonds hit multi-week lows and
equities have weakened in the past few days as the U.S. 10-year
yield reached four-year highs and the dollar firmed.
    Poland's 10-year government bond yield dropped four basis
points to 3.078 percent on Thursday and its Romanian peer was
bid lower by 4 basis points.
    Hungarian yields dropped 1-2 basis points ahead of the
government's bi-weekly auctions, with 10-year papers trading at
2.55 percent.
    The Hungarian central bank's first comments since Prime
Minister Viktor Orban's government party Fidesz got re-elected
on April 8 confirmed that no change is expected in ultra-loose
monetary policy, one Budapest-based fixed income trader said.

    Deputy Governor Marton Nagy told Reuters that the bank was
relaxed about domestic inflation trends and was unlikely to
start tightening up its easy monetary policy before the ECB
begins raising rates.
    "It is more likely that the NBH will take any steps only
after the ECB moves," he said.
    The trader said the government was likely to sell bonds at
the auction at the current or even lower yield levels after a
rise in yields driven by U.S. Treasuries.
    "Foreigners have no reason to sell. Short-term yields are
near zero... and they lengthen their portfolio maturity if they
can," the trader said.
    The ECB is unlikely to stir markets, although any remarks
showing worry over a recent slowdown in European economies could
weaken the euro against the dollar, market participants
said.
    Central Europe's main currencies eased in tandem with the
dollar's global gains in the past days, but the real cause of
their weakening was the rise in U.S. debt yields, one
Budapest-based currency dealer said.
    "A further rise in dollar yields could weaken the forint
further, but as I can see that does not continue," the dealer
said.
    The forint was flat at 313.25 against the euro at
0808 GMT, still near the seven-week lows it set at 313.55 on
Wednesday.
    The Czech crown and the zloty rebounded
and gained about 0.1 percent.
    Remarks from the ECB concerning recent poor economic data
"could push EURUSD down and stronger dollar might still weigh on
the zloty," Bank Zachodni WBK analysts said in a note.
    Regional equity indices mostly firmed. 
    Bucharest's index, which has been buoyed by
lucrative dividends, hit a new 10-year high.
    Czech broadcaster CME's shares gained more than 4
percent after it announced a new financing deal and a rise in
core profits.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1008 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4300   25.4600    +0.12%    +0.44%
 crown      >                                       
 Hungary    <EURHUF=  313.2500  313.2100    -0.01%    -0.75%
 forint     >                                       
 Polish     <EURPLN=    4.2316    4.2340    +0.06%    -1.31%
 zloty      >                                       
 Romanian   <EURRON=    4.6515    4.6475    -0.09%    +0.61%
 leu        >                                       
 Croatian   <EURHRK=    7.4220    7.4185    -0.05%    +0.11%
 kuna       >                                       
 Serbian    <EURRSD=  118.0400  118.1900    +0.13%    +0.39%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1123.83  1121.670    +0.19%    +4.24%
                                       0            
 Budapest             37973.76  38049.97    -0.20%    -3.56%
 Warsaw                2264.26   2257.00    +0.32%    -8.00%
 Bucharest             9028.04   9006.10    +0.24%   +16.43%
 Ljubljana  <.SBITOP    845.63    843.95    +0.20%    +4.87%
            >                                       
 Zagreb                1789.14   1785.79    +0.19%    -2.92%
 Belgrade   <.BELEX1    745.63    746.63    -0.13%    -1.86%
            5>                                      
 Sofia                  661.69    663.11    -0.21%    -2.33%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.7980    0.0350   +134bps     +4bps
            R>                                      
   5-year   <CZ5YT=R    1.2270    0.0190   +124bps     +3bps
            R>                                      
   10-year  <CZ10YT=    1.7620   -0.0330   +115bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5240   -0.0080   +207bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.3830   -0.0450   +239bps     -4bps
            R>                                      
   10-year  <PL10YT=    3.0620   -0.0400   +245bps     -2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.95      1.05      1.20      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.10      0.18      0.03
                                                    
 Poland                   1.73      1.75      1.76      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto, Editing by William Maclean)
  
 
 
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