January 3, 2019 / 10:25 AM / 21 days ago

CEE MARKETS-Hungarian bond yields hit multi-month lows ahead of auction

    * Hungarian yields fall further despite auction offer rise
    * Media report says Hungary received big EU fund inflow in
Dec
    * Romanian stock index is corrected upwards in year's 1st
session

    By Sandor Peto
    BUDAPEST, Jan 3 (Reuters) - Hungarian government bonds
extended their price gains, with yields dropping to new
multi-month lows amid optimism that demand will be robust at the
year's first auction on Thursday.
    The country's 10-year papers traded at yields around 2.815
percent ahead of the auctions, their lowest level
since May 2018.
    The yield was lower by 4 basis points from Wednesday and
down by almost half a percentage point from its levels two weeks
ago.
    Yields dropped even though the 70 billion forint ($246.77
million) offer at the primary sale was 15 billion higher than at
the last auction held four weeks ago.
    The business news site portfolio.hu reported late on
Wednesday that the government had received a huge amount of
European Union fund inflows in December. The Finance Ministry
did not immediately comment on the report.
    "I expect a strong auction," one Budapest-based fixed income
trader said.
    "The fall in yield follows a plunge in interest rate swaps
(IRSs) after the central bank's latest swap tender (in
December), the trader added.
    "There is a very wide spread between IRSs and bond yields,
which will inevitably narrow, but until then it may trigger
package sales by some big accounts."
    Poland's 10-year bond yield fell similar to its Hungarian
peer, by around 10 basis points already on Wednesday, helped by
disappointing PMI manufacturing index figures from Poland and
the Czech Republic and a decline in Bund yields.
    Poland's 10-year yield moved a tad lower again on Thursday
to 2.746 percent on Thursday, while Bund yields changed little,
and yields in the southern part of the euro zone -- often
tracked by Central Europe -- rose.
    Increased risk aversion in international markets after
Wednesday's weak Chinese manufacturing data and a revenue
warning from Apple was reflected by a weakening of
Central European currencies and some of its stock indices.
    Warsaw led the decline in both asset classes, with its
blue-chip stock index dropping 1.2 percent by 0949 GMT,
still staying above its 90-day moving average, and the zloty
 shedding a quarter of a percent to 4.3027 per euro.
    Bucharest stocks bucked the Asian and European trend
and rose 1.5 percent in their first session in 2019.
    The index has still regained only about a third of its
losses suffered in a plunge in December after the government
announced new taxes that hurt the earnings of companies in
several sectors, including banks.
    The leu eased 0.2 percent to 4.665 versus the
euro. 
    The Romanian central bank may announce at its news
conference after its January 8 meeting that it would tolerate a
weaker leu than so far, ING analysts said in a note.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1049 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7400   25.7760    +0.14%    -0.13%
 crown      >                                       
 Hungary    <EURHUF=  322.4300  322.2500    -0.06%    -0.42%
 forint     >                                       
 Polish     <EURPLN=    4.3027    4.2925    -0.24%    -0.30%
 zloty      >                                       
 Romanian   <EURRON=    4.6650    4.6576    -0.16%    -0.24%
 leu        >                                       
 Croatian   <EURHRK=    7.4270    7.4200    -0.09%    -0.23%
 kuna       >                                       
 Serbian    <EURRSD=  118.3000  118.4000    +0.08%    +0.00%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                 990.93  989.3700    +0.16%    +0.44%
 Budapest             39614.13  39734.06    -0.30%    +1.21%
 Warsaw                2273.68   2301.62    -1.21%    -0.13%
 Bucharest             7497.23   7383.68    +1.54%    +1.54%
 Ljubljana  <.SBITOP    796.66    804.26    -0.94%    -0.94%
            >                                       
 Zagreb                1726.37   1729.39    -0.17%    -1.28%
 Belgrade   <.BELEX1    729.88    761.69    -4.18%    -4.18%
            5>                                      
 Sofia                  585.37    586.12    -0.13%    -1.53%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.5360    0.0070   +215bps     +1bps
            R>                                      
   5-year   <CZ5YT=R    1.6400   -0.1090   +197bps    -11bps
            R>                                      
   10-year  <CZ10YT=    1.7360   -0.0610   +156bps     -7bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.3900    0.0250   +200bps     +3bps
            R>                                      
   5-year   <PL5YT=R    2.1970   -0.0130   +253bps     -1bps
            R>                                      
   10-year  <PL10YT=    2.7650    0.0170   +259bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.08      2.09      2.08      2.01
            <PRIBOR=                                
            >                                       
 Hungary                  0.29      0.52      0.76      0.13
                                                    
 Poland                   1.74      1.75      1.75      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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($1 = 283.6700 forints)

 (Additional reporting by Robert Muller in Prague
Editing by Richard Balmforth)
  
 
 
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