* Hungary's bond yields continue to drop ahead of auction
* Finance Minister says delayed EU funds can flow in soon
* Hungarian wages, Polish retail data show strong growth
* Polish shares give up some of Wednesday's strong gain
By Sandor Peto
BUDAPEST, Nov 22 (Reuters) - Hungarian government bond
yields fell to multi-month lows ahead of the year's penultimate
bond auction on Thursday, amid optimism over European
Union fund inflows for the rest of 2018.
Two days after the National Bank of Hungary (NBH) kept the
lowest central bank rate in the eastern wing of the European
Union on hold at 0.9 percent, the country's bonds traded at
yields about 5 basis points below Wednesday's fixing
.
The 10-year yield, at 3.38 percent, was the lowest since
August, while the 3-year yield, around 1.5 percent, traded at
5-month lows.
Hungarian bond yields often rise ahead of auctions, but this
time they are under pressure as investors close short positions
ahead of the end of the year, market participants said.
"Yields are coming back after a jump in early October as
core market yields like Bunds have also come down," said Gergely
Forian-Szabo, fund manager of Amundi in Budapest.
"Also there are positive developments in EU funds inflows
despite earlier fears that their delay could open up a big gap
in the budget," he added.
Finance Minister Mihaly Varga told Reuters late on Wednesday
the government had pre-financed over 1.5 trillion forints ($5.32
billion) worth of spending, of which only some 600 billion had
been reimbursed so far and more could arrive by the end of the
year.
The Hungarian yield decline came in tandem with a rise in
foreign investors' Hungarian government bond holdings
to a 3-year high, Forian-Szabo said.
Worries the NBH could start to increase rates too late to
tackle a rise in inflation have also eased, but may return if
continuing strong growth gives more fuel to price rises than
expected, market participants said.
"It will be exciting to watch if (annual) inflation figures
in the next months indeed show a retreat (from 3.8 percent in
October) towards 3 percent," one Budapest-based fixed income
trader said.
A 10.4 percent annual rise in gross wages in Hungary, and a
9.7 percent increase in retail sales in Poland, indicated
continuing robust growth in figures released on Thursday.
Despite the figures, Central European currencies and stocks
gave up some of the ground they gained on Wednesday as fears of
a global economic slowdown weighed on international markets.
Warsaw's bluechip equities index dropped by 0.3
percent after posting its biggest gain since early January on
Wednesday, when it rose 2.7 percent.
Polish shares and the zloty rallied in the previous session
after the government changed tack on legal reforms that have
fuelled a crisis in relations with the European Commission.
CEE SNAPSHOT AT
MARKETS 0954 CET
CURRENCI
ES
Latest Previous Daily Change
bid close change in 2018
Czech <EURCZK= 26.0100 25.9940 -0.06% -1.80%
crown >
Hungary <EURHUF= 321.6600 321.4000 -0.08% -3.34%
forint >
Polish <EURPLN= 4.3060 4.2986 -0.17% -3.01%
zloty >
Romanian <EURRON= 4.6610 4.6643 +0.07% +0.40%
leu >
Croatian <EURHRK= 7.4300 7.4323 +0.03% +0.00%
kuna >
Serbian <EURRSD= 118.4800 118.3900 -0.08% +0.02%
dinar >
Note: calculated from 1800 CET
daily
change
Latest Previous Daily Change
close change in 2018
Prague 1063.45 1067.790 -0.41% -1.36%
0
Budapest 39316.82 39431.33 -0.29% -0.15%
Warsaw 2213.30 2219.62 -0.28% -10.07%
Bucharest 8501.99 8535.50 -0.39% +9.65%
Ljubljana <.SBITOP 813.72 811.39 +0.29% +0.91%
>
Zagreb 1729.97 1733.14 -0.18% -6.13%
Belgrade <.BELEX1 742.84 741.12 +0.23% -2.23%
5>
Sofia 588.69 589.47 -0.13% -13.10%
BONDS
Yield Yield Spread Daily
(bid) change vs Bund change
in
Czech spread
Republic
2-year <CZ2YT=R 1.5220 -0.0150 +217bps -1bps
R>
5-year <CZ5YT=R 1.8420 0.0070 +208bps +2bps
R>
10-year <CZ10YT= 2.1040 0.0300 +175bps +5bps
RR>
Poland
2-year <PL2YT=R 1.5830 0.0050 +223bps +1bps
R>
5-year <PL5YT=R 2.4510 0.0010 +269bps +1bps
R>
10-year <PL10YT= 3.2130 0.0030 +286bps +2bps
RR>
FORWARD RATE AGREEMEN
T
3x6 6x9 9x12 3M
interban
k
Czech Rep 2.22 2.33 2.42 2.01
<PRIBOR=
>
Hungary 0.30 0.55 0.86 0.13
Poland 1.77 1.80 1.84 1.72
Note: FRA are for ask prices
quotes
*************************************************
*************
(Additional reporting by Marcin Goclowski in Warsaw; Editing by
Mark Potter)