October 11, 2018 / 9:05 AM / 2 months ago

CEE MARKETS-Bonds rebound before Hungarian sale, equities track global fall

    * Hungarian 10-year yield off 3-year high ahead of auction
    * Global equities sell-off knock down CEE stock indices
    * Currencies stay rangebound near Wednesday's closing levels

    By Sandor Peto
    BUDAPEST, Oct 11 (Reuters) - Hungarian government bond
yields retreated on Thursday ahead of an auction, tracking U.S.
Treasuries, while Central European stocks took a beating from a
global sell-off.
    The region's main equities indices fell to multi-week lows
at the opening as sentiment soured due to a plunge in stocks on
Wall Street and in Asia.
    The global sell-off was partly caused by comments from
International Monetary Fund head Christine Lagarde who said
stock market valuations had been "extremely high".
     Only equities were hit by her remarks and then only
briefly: Regional indices had made up almost half their initial
losses in the first hour of trading.
    Warsaw's bluechip index initially fell 2 percent
upon opening but was down 1.3 percent at 0800 GMT, weighed down
by shares of oil group PKN Orlen which fell 1.1 percent
to a 2-month low.
    Regional currencies hovered near Wednesday's closing levels,
with the dollar giving up some ground in global markets.
    Government bond yields, especially in Hungary, mostly
retreated as they tracked the 10-year U.S. yield.
    The Hungarian Debt Management Agency AKK was due to hold its
bi-weekly bond auctions on Thursday.
    "Yields have been hectic so it is still hard to predict the
outcome of the auction," one Budapest-based fixed income trader
said.
    "I can imagine that they (the AKK) will cut the amounts
slightly at the increased yield levels, but a normal auction
with a wider spread in the yields accepted is equally possible
now," the trader added. 
    Hungary's 10-year yield rose to 3.92 percent on Wednesday,
its highest level since the middle of 2015.
    It retreated to 3.88 percent before Thursday's primary sale
, while Poland's corresponding yield was bid lower
by 2 basis points at 3.3 percent.
    The Hungarian auction results will be announced at 0930 GMT.
    Three-month bills sold at negative yields recently and
Hungary's yield curve is at its steepest in several years as the
Hungarian central bank keeps its short-term interest rates at
record lows - the lowest in the region.
    The bank, which meets next Thursday, is expected to hold
interest rates in coming months.
    Wednesday's surge in yields surprised some as it came in
light trade, but the trader said it was fuelled by asset swap
deals by market players betting on a rise in Hungarian medium-
and long-term bond yields.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1000 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8530   25.8640    +0.04%    -1.20%
 crown      >                                       
 Hungary    <EURHUF=  325.3500  325.3000    -0.02%    -4.44%
 forint     >                                       
 Polish     <EURPLN=    4.3159    4.3115    -0.10%    -3.23%
 zloty      >                                       
 Romanian   <EURRON=    4.6665    4.6670    +0.01%    +0.28%
 leu        >                                       
 Croatian   <EURHRK=    7.4075    7.4095    +0.03%    +0.31%
 kuna       >                                       
 Serbian    <EURRSD=  118.3100  118.3200    +0.01%    +0.16%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1084.43  1097.170    -1.16%    +0.58%
                                       0            
 Budapest             36378.98  36821.12    -1.20%    -7.61%
 Warsaw                2167.84   2197.34    -1.34%   -11.92%
 Bucharest             8400.18   8487.88    -1.03%    +8.34%
 Ljubljana  <.SBITOP    822.89    830.31    -0.89%    +2.05%
            >                                       
 Zagreb                1752.70   1770.15    -0.99%    -4.89%
 Belgrade   <.BELEX1    732.42    732.50    -0.01%    -3.60%
            5>                                      
 Sofia                  613.32    617.42    -0.66%    -9.47%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7180    0.1570   +229bps    +18bps
            R>                                      
   5-year   <CZ5YT=R    1.8910    0.0220   +202bps     +6bps
            R>                                      
   10-year  <CZ10YT=    2.1600   -0.0100   +166bps     +4bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6090   -0.0210   +218bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.5940   -0.0220   +272bps     +2bps
            R>                                      
   10-year  <PL10YT=    3.3020   -0.0180   +280bps     +3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.02      2.20      2.33      1.75
            <PRIBOR=                                
            >                                       
 Hungary                  0.47      0.79      1.15      0.17
                                                    
 Poland                   1.76      1.80      1.87      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto
Editing by Raissa Kasolowsky)
  
 
 
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