May 24, 2018 / 1:35 PM / 5 months ago

CEE MARKETS-Bonds sell smoothly on relief from Fed minutes, Turkey

    * Fed minutes, Turkey rate hike improve mood after sell-off
    * Hungary again manages to sell bonds worth about HUF 100
bln
    * Poland, Romania smoothly sell bonds, yields retreat
    * Czechs sell 26-week bills at 6-year high yield

 (Recasts with government debt auction results)
    By Sandor Peto
    BUDAPEST, May 24 (Reuters) - Central European assets firmed
across the board on Thursday as Hungary, Romania and Poland
smoothly sold government bonds at their auctions after a surge
in yield levels this month.
    Hungary sold almost 100 billion forints ($367.35
million)worth of papers, repeating
the success of its previous three bi-weekly tenders despite
fears that a sell-off in recent weeks may deter buyers.
    Hungarian bonds, after outperforming regional peers last
year, have been worst hit in the region by the selling wave that
has swept emerging markets this month due to a rally in the
dollar and U.S. Treasury yields.
    But both the dollar and the 10-year U.S. yield retreated
after Wednesday's Federal Reserve minutes did not suggest that
it would accelerate its rate hikes.
    "Turkey's (central bank) rate hike also improves sentiment.
Not that it ends (lira) jitters, but they chose the way liked by
investors," one Budapest-based fixed income trader said.
    "This may start a rally in less risky emerging markets (like
Central Europe)." 
    The average yields set at Hungary's bond auction were 30-40
basis points above levels two weeks ago, but below secondary
market levels, and yield dropped further after the primary sale.
    The country's 10-year papers traded at a yield of 3.05
percent, down from 3.11 set at the auction and above 3.2 percent
earlier this week, widening a gap with Poland's corresponding
yield, which dropped 3 basis points to 3.19 percent.
    Yields in Poland rose much less in the past weeks than in
Hungary. Hungary's 10-year yield closed a gap with its Polish
peer earlier this week, after trading well below it for years.
    Poland also smoothly sold 3 billion zloty ($818.17 million )
worth of bonds offered at its own auction.
    "For some investors these (yield) levels are attractive,
especially because this situation (the recent sell-off) is not
caused by Polish economic problems," said Mateusz Sutowicz,
senior economist of Bank Millennium.
    Romania also sold a planned 200 million lei ($50.74
million)worth of bonds. The 2031-expiry series on offer are
quite illiquid, but the 5.15 percent average yield, up 40 basis
points from the previous sale of the bonds in February, made
them attractive.
    Romanian bond yields reached 4-year highs recently, boosted
by a surge in inflation and uncertainty over fiscal policy.
    The improved sentiment helped them retreat on Thursday, with
the 10-year yield bid lower by 3 basis points at 4.88 percent,
even though the leader of the ruling Social Democrats said late
on Wednesday that the government would maintain its wage- and
pension-boosting policies.
    The Czech Republic, meanwhile, where the central bank is
seen increasing interest rates further later this year, sold
26-week Treasury bills at the highest yield in almost six years.
 
    Czech central bank governor Jiri Rusnok reiterated late on
Wednesday that the bank might increase rates faster if the crown
 does not strengthen enough.
      
            CEE       SNAPSHOT   AT                         
            MARKETS             1509 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8270   25.8400    +0.05%    -1.10%
 crown      >                                       
 Hungary    <EURHUF=  319.5400  319.2100    -0.10%    -2.70%
 forint     >                                       
 Polish     <EURPLN=    4.3023    4.3090    +0.16%    -2.93%
 zloty      >                                       
 Romanian   <EURRON=    4.6280    4.6290    +0.02%    +1.12%
 leu        >                                       
 Croatian   <EURHRK=    7.3935    7.3870    -0.09%    +0.50%
 kuna       >                                       
 Serbian    <EURRSD=  118.0600  118.1300    +0.06%    +0.37%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1102.63  1099.540    +0.28%    +2.27%
                                       0            
 Budapest             35877.61  35456.52    +1.19%    -8.89%
 Warsaw                2216.75   2209.32    +0.34%    -9.93%
 Bucharest             8274.69   8345.65    -0.85%    +6.72%
 Ljubljana  <.SBITOP    905.35    900.61    +0.53%   +12.27%
            >                                       
 Zagreb                1850.63   1851.38    -0.04%    +0.42%
 Belgrade   <.BELEX1    744.17    744.29    -0.02%    -2.06%
            5>                                      
 Sofia                  642.90    642.90    +0.00%    -5.10%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.9530    0.0740   +157bps     +7bps
            R>                                      
   5-year   <CZ5YT=R    1.4660    0.0610   +160bps     +6bps
            R>                                      
   10-year  <CZ10YT=    1.9880   -0.0050   +150bps     +1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6170   -0.0020   +223bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.4870   -0.0130   +262bps     -1bps
            R>                                      
   10-year  <PL10YT=    3.1900   -0.0370   +270bps     -3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.04      1.19      1.32      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.10      0.39      0.12
                                                    
 Poland                   1.75      1.76      1.82      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 ($1 = 272.2200 forints)

($1 = 3.9420 lei)

($1 = 3.6667 zlotys)

 (Additional reporting by Luiza Ilie in Bucharest, Robert
Mueller in Prague and Pawel Sobczak in Warsaw, Editing by Mark
Heinrich)
  
 
 
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