April 16, 2019 / 2:40 PM / 9 days ago

CEE MARKETS-Hungarian bond yields retreat on ECB growth worries

    * Forint briefly firms through 100-day moving average
    * Hungarian bond yields track Bund yields fall, stay lower
    * Polish fiscal measures support bond yield decline

 (Recasts with impact of report on ECB rate setter worries,
quotes)
    By Sandor Peto
    BUDAPEST, April 16 (Reuters) - Hungarian government bond
yields retreated from multi-week highs on Tuesday as worries
over economic slowdown in the European Union's main economies
nudged Central European yields lower. 
    The region's yields typically rose in the past few days,
tracking Bunds.
    Mainly Hungarian government bonds were hit as the country's
central bank late last month dropped its guidance of gradual
policy tightening, and annual inflation rose near the top of the
bank's 2.4 percent target range in March.
    Bund yields fell on Tuesday due to reports that several
European Central Bank policymakers regarded the bank's economic
projections as too optimistic.
    The comments, which suggested that monetary policy in the
euro zone could remain loose longer, triggered a downwards
correction in Hungarian yields.
    They did not fully track a later rebound in Bund yields.
    "Understanding the meaning of the ECB story was a far cry
and Bund yields rebounded. But Hungarian yields remained lower
(than yesterday)," one Budapest-based trader said.
    Hungary's 10-year yield remained below 4-month highs set on
Monday, trading at 3.23 percent, while 5- and 3-month yields
were off multi-week highs.
    
    TAKEN STRENGTH
    The forint, which had taken strength from the
previous surge in yields, also retreated.
    It joined a moderate easing of other Central European
currencies, returning behind the 320 psychological line against
the euro, off a 3-week high set in early trade beyond its
100-day moving average of 319.5. 
    Dealers said technical factors kept the currency near 320. 
    The Hungarian 10-year yield's spread over the corresponding
Polish bond was still the highest in more than a month.
    The Polish yield continued to decline, trading at 2.85
percent, down 2 basis points from Monday and 5 basis points from
Friday.
    Polish bond yields declined on Monday after the government,
gearing up for elections late this year, announced new measures
to stimulate the economy and generate revenues.
    The measures include transferring all state-guaranteed
private pension funds to individual retirement accounts.

    "The prospect of GDP growth close to 4 percent and budget
deficit seemingly under control could well prove sufficiently
attractive for foreign investors to look beyond domestic
political ploys and directly at high yielding opportunities in
Poland," Rabobank analyst Piotr Matys said in a note. 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1611 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6750   25.6360    -0.15%    +0.12%
 crown      >                                       
 Hungary    <EURHUF=  320.2500  320.1500    -0.03%    +0.26%
 forint     >                                       
 Polish     <EURPLN=    4.2733    4.2718    -0.04%    +0.38%
 zloty      >                                       
 Romanian   <EURRON=    4.7610    4.7586    -0.05%    -2.25%
 leu        >                                       
 Croatian   <EURHRK=    7.4385    7.4360    -0.03%    -0.38%
 kuna       >                                       
 Serbian    <EURRSD=  118.0000  117.9300    -0.06%    +0.25%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1094.24  1103.020    -0.80%   +10.91%
                                       0            
 Budapest             42765.09  42815.92    -0.12%    +9.26%
 Warsaw                2367.42   2358.19    +0.39%    +3.99%
 Bucharest             8242.52   8271.75    -0.35%   +11.63%
 Ljubljana  <.SBITOP    879.45    882.58    -0.35%    +9.35%
            >                                       
 Zagreb                1806.24   1817.12    -0.60%    +3.28%
 Belgrade   <.BELEX1    739.31    740.59    -0.17%    -2.94%
            5>                                      
 Sofia                  575.36    575.43    -0.01%    -3.21%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.8350    0.0070   +242bps     +1bps
            R>                                      
   5-year   <CZ5YT=R    1.6910    0.0100   +207bps     +1bps
            R>                                      
   10-year  <CZ10YT=    1.8490    0.0010   +179bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6060   -0.0210   +219bps     -2bps
            R>                                      
   5-year   <PL5YT=R    2.2100   -0.0070   +259bps     -1bps
            R>                                      
   10-year  <PL10YT=    2.8730   -0.0200   +281bps     -3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.16      2.20      2.20      2.02
            <PRIBOR=                                
            >                                       
 Hungary                  0.36      0.51      0.71      0.16
                                                    
 Poland                   1.74      1.75      1.75      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
    

 (Additional reporting by Alicja Ptak in Warsaw, Editing by Ed
Osmond)
  
 
 
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