November 23, 2018 / 11:35 AM / 18 days ago

CEE MARKETS-Hungarian bond yields set multi-month lows ahead of Moody's review

    * Hungarian bond prices extend gain ahead of Moody's review
    * Some market participants expect Moody's to upgrade Hungary
    * Polish stocks give up some ground after rebound

    By Sandor Peto
    BUDAPEST, Nov 23 (Reuters) - Hungarian government bonds
traded at multi-month lows on Friday ahead of a review of the
country's credit rating by Moody's which may bring an upgrade.
    The agency rates Hungary Baa3 with stable outlook and said
in August that tighter mortgage lending rules launched by the
Hungarian central bank were credit positive.
    It is expected to announce the result of the rating's
regular review after markets close in Central Europe.
    Hungary's falling public debt, current account surplus and a
fall in bad loans in its banking sector could earn it a
one-notch upgrade, Raiffeisen analyst Gintaras Slizhyus said in
a note.
    One Budapest-based currency dealer said only part of the
market expected an upgrade. The forint eased slightly
against the euro to 321.85, still near its strongest levels
since early August.
    "This means, an upgrade could strengthen the forint, but it
is unlikely to strengthen much beyond 320 even in that case,"
the dealer said.
    Hungarian government bond yields dropped 1-2 basis points
further from Thursday's multi-month lows, partially helped by
the expectations for an upgrade.
    "If the upgrade does not come, yields might rise a bit," one
fixed-income trader said.
    The yields have come down by about 50 basis points since
early October, with the pace of the decline picking up in the
past week.
    Hungary's 1.36 trillion forint budget deficit in the first
ten months of the year was well above the full-year target.
    But expectations have strengthened since last week that much
of delayed European Union funds worth billions of euros will
flow in late this year, cutting the deficit and the government's
financing needs.
    That expectation has helped buoy government papers.
    The Hungarian government bond holding of foreign investors
 has increased by 6 percent since early October to
above 4 trillion forints, its highest level in more than three
years.
    Buying by some big foreign investors pushed the 5-year
forint interest rate swap yields sharply down before Thursday's
government bond auction, the last but one this year. That also
pulled down spot bond yields, another fixed income trader said.
    Elsewhere in Central Europe, Polish government bond yields
also dropped by 1-2 basis points, giving up the modest gains
they posted on Thursday.
    The yields rose on Thursday after the minutes of the Polish
central bank's November meeting showed that some rate setters
suggested possible rate hikes in the coming quarters.

    Polish Prime Minister Mateusz Morawiecki appointed a new
head of financial market regulator KNF on Friday, after the
former head resigned last week amid corruption allegations.
    The scandal has shaken the Polish stock market, mainly bank
stocks. Warsaw's bluechip index <.WIG20) has rebounded this
week, but gave up some ground on Friday.
            CEE       SNAPSHOT   AT                         
            MARKETS             1150 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.9730   26.0100    +0.14%    -1.66%
 crown      >                                       
 Hungary    <EURHUF=  321.8500  321.2100    -0.20%    -3.40%
 forint     >                                       
 Polish     <EURPLN=    4.2980    4.2960    -0.05%    -2.83%
 zloty      >                                       
 Romanian   <EURRON=    4.6590    4.6595    +0.01%    +0.44%
 leu        >                                       
 Croatian   <EURHRK=    7.4300    7.4320    +0.03%    +0.00%
 kuna       >                                       
 Serbian    <EURRSD=  118.3000  118.3600    +0.05%    +0.17%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1063.96  1065.640    -0.16%    -1.32%
                                       0            
 Budapest             39357.78  39489.38    -0.33%    -0.05%
 Warsaw                2223.67   2236.35    -0.57%    -9.65%
 Bucharest             8475.96   8514.96    -0.46%    +9.31%
 Ljubljana  <.SBITOP    822.54    819.35    +0.39%    +2.00%
            >                                       
 Zagreb                1715.08   1722.34    -0.42%    -6.93%
 Belgrade   <.BELEX1    745.67    744.97    +0.09%    -1.86%
            5>                                      
 Sofia                  584.42    587.87    -0.59%   -13.73%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6630    0.1020   +231bps    +11bps
            R>                                      
   5-year   <CZ5YT=R    1.8630    0.0210   +210bps     +4bps
            R>                                      
   10-year  <CZ10YT=    2.0880    0.0140   +174bps     +4bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6160    0.0020   +226bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.4840    0.0030   +272bps     +2bps
            R>                                      
   10-year  <PL10YT=    3.2110   -0.0230   +286bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.22      2.33      2.41      2.01
            <PRIBOR=                                
            >                                       
 Hungary                  0.30      0.55      0.86      0.13
                                                    
 Poland                   1.77      1.80      1.86      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 ]
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1150 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.9730   26.0100    +0.14%    -1.66%
 crown      >                                       
 Hungary    <EURHUF=  321.8500  321.2100    -0.20%    -3.40%
 forint     >                                       
 Polish     <EURPLN=    4.2980    4.2960    -0.05%    -2.83%
 zloty      >                                       
 Romanian   <EURRON=    4.6590    4.6595    +0.01%    +0.44%
 leu        >                                       
 Croatian   <EURHRK=    7.4300    7.4320    +0.03%    +0.00%
 kuna       >                                       
 Serbian    <EURRSD=  118.3000  118.3600    +0.05%    +0.17%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague          1063.96  1065.640    -0.16%    -1.32%
                                       0            
 Budapest      39357.78  39489.38    -0.33%    -0.05%
 Warsaw       2223.67   2236.35    -0.57%    -9.65%
 Bucharest     8475.96   8514.96    -0.46%    +9.31%
 Ljubljana  <.SBITOP    822.54    819.35    +0.39%    +2.00%
            >                                       
 Zagreb       1715.08   1722.34    -0.42%    -6.93%
 Belgrade   <.BELEX1    745.67    744.97    +0.09%    -1.86%
            5>                                      
 Sofia         584.42    587.87    -0.59%   -13.73%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6630    0.1020   +231bps    +11bps
            R>                                      
   5-year   <CZ5YT=R    1.8630    0.0210   +210bps     +4bps
            R>                                      
   10-year  <CZ10YT=    2.0880    0.0140   +174bps     +4bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6160    0.0020   +226bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.4840    0.0030   +272bps     +2bps
            R>                                      
   10-year  <PL10YT=    3.2110   -0.0230   +286bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep       2.22      2.33      2.41      2.01
            <PRIBOR=                                
            >                                       
 Hungary         0.30      0.55      0.86      0.13
                                           
 Poland          1.77      1.80      1.86      1.72
                                           
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto)
  
 
 
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