April 26, 2018 / 2:23 PM / a month ago

CEE MARKETS-Bonds, currencies rebound as U.S. yield retreats, ECB on hold

    * Bonds, currencies rebound as US yield rally loses steam
    * ECB keeps policy on hold, helping euro and CEE units
    * Hungary boosts bond sale at its auctions

 (Recasts with ECB decision and comments, trader comments)
    By Sandor Peto
    BUDAPEST, April 26 (Reuters) - Central European government
bonds and currencies regained some ground on Thursday as a rally
in U.S. Treasury bond yields and the dollar lost steam and the
European Central Bank kept policy on hold.    
    In the past few days, regional currencies and bonds hit
multi-week lows and equities have weakened as the U.S. 10-year
yield reached four-year highs and the dollar firmed.
    But the U.S. yield retreated below the key 3-percent line on
Thursday and the euro reversed its slide against the
dollar as ECB President Mario Draghi played down concerns over
recent soft euro zone economic data. 
    The ECB's decision to keep rates on hold and its comments
did not surprise most market participants.
    Central Europe's most liquid currencies, the zloty
and the forint firmed against the euro even before the
ECB meeting and were stronger by 0.1 percent at 1344 GMT.
    Poland's 10-year government bond yield dropped 4 basis
points to 3.065 percent and its Romanian peer was bid lower by 6
basis points at 4.59 percent.
    Hungary lifted its offer by almost 50 percent at Thursday's
auctions, selling bonds near secondary-market levels.
    "The (government debt agency) AKK was happy, selling 100
billion forints worth of bonds at these yields, aware that
yields will be much higher in the second half of the year," one
Budapest-based fixed income trader said.
    The Hungarian central bank's first comments since Prime
Minister Viktor Orban's Fidesz party was re-elected on April 8
confirmed that no change is expected in ultra-loose monetary
policy, another trader said.
    Deputy Governor Marton Nagy told Reuters 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 Serbian central bank continued to buy euros on the
market to stem gains in the dinar which is trading
near four-year highs against the euro even though the bank has
cut interest rates twice in two months. 
    Regional equities were mixed and mostly rangebound. 
    Bucharest's index, retreated from a new 10-year high
it had reached, helped by lucrative dividend payments by some
listed companies.
    Czech broadcaster CME's shares gained almost 3
percent after it announced a new financing deal and a rise in
core profits.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1544 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4800   25.4600    -0.08%    +0.24%
 crown      >                                       
 Hungary    <EURHUF=  312.7700  313.2100    +0.14%    -0.59%
 forint     >                                       
 Polish     <EURPLN=    4.2300    4.2340    +0.09%    -1.27%
 zloty      >                                       
 Romanian   <EURRON=    4.6560    4.6475    -0.18%    +0.51%
 leu        >                                       
 Croatian   <EURHRK=    7.4220    7.4185    -0.05%    +0.11%
 kuna       >                                       
 Serbian    <EURRSD=  118.2000  118.1900    -0.01%    +0.25%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1124.07  1121.670    +0.21%    +4.26%
                                       0            
 Budapest             38116.06  38049.97    +0.17%    -3.20%
 Warsaw                2274.80   2257.00    +0.79%    -7.57%
 Bucharest             8953.58   9006.10    -0.58%   +15.47%
 Ljubljana  <.SBITOP    841.28    843.95    -0.32%    +4.33%
            >                                       
 Zagreb                1786.98   1785.79    +0.07%    -3.03%
 Belgrade   <.BELEX1    740.57    746.63    -0.81%    -2.53%
            5>                                      
 Sofia                  660.38    663.11    -0.41%    -2.52%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.7780    0.0150   +133bps     +2bps
            R>                                      
   5-year   <CZ5YT=R    1.2130    0.0050   +122bps     +1bps
            R>                                      
   10-year  <CZ10YT=    1.7510   -0.0450   +113bps     -3bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5100   -0.0220   +206bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.3870   -0.0410   +239bps     -4bps
            R>                                      
   10-year  <PL10YT=    3.0610   -0.0410   +244bps     -2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.95      1.04      1.17      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.10      0.18      0.03
                                                    
 Poland                   1.74      1.75      1.76      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto
Editing by Catherine Evans)
  
 
 
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