June 14, 2019 / 9:37 AM / 3 months ago

CEE MARKETS-Polish 10-year bond yield drops to 4-year low

    * Bond yields track core markets lower on politics, growth
worries
    * Poland's 10-year bond yield at lowest since early 2015
    * Regional currencies set multi-month highs, stocks mostly
ease

    By Sandor Peto and Alicja Ptak
    BUDAPEST/WARSAW, June 14 (Reuters) - Poland's 10-year
government bond yield sank to its lowest level in more than four
years on Friday after an attack on two oil tankers in the Gulf,
which the United States blamed on Iran, led to global buying of
less risky assets.
    Tehran denied the allegation following the attacks on
Thursday, but concerns grew about a new U.S.-Iranian
confrontation.
    The Polish paper traded at 2.3895% at 0843
GMT, down 3 basis points from Thursday's close.
    "(There is a) big drop in yields worldwide, (and) the rising
presence of foreign investors dragged (Polish) yields down,"
said Michal Zak, dealer at mBank.
    "Yesterday's (Polish government bond) auction apparently has
not covered all positions, if only a day after we see a 10 basis
point drop," he added, referring to the fall in yield from
Thursday's peak. 
    Bucharest's government bond auction also drew robust demand
on Thursday.
    Although a surge in wages in the region is pushing consumer
prices higher, Poland has the lowest annual inflation in the
region - revised up to 2.4 percent for May on Friday.
    Polish rate setter Jerzy Osiatynski said that the central
bank may need to start to increase its record low interest rates
next year, but in 2019 the cost of credit will not be changed.
   
    The corresponding Hungarian yield dropped 4 basis points
from Thursday's fixing to 2.75%. 
    "This is what we see recently: bonds are the first to
react," one Budapest-based fixed income trader said, adding that
worries over global economic growth and politics had pushed
yields lower anyway in the past weeks.
    "All yields are coming down in the world, independent of
government budgets and other local factors," the trader said.
    Bond yields in fast-growing central Europe are above those
in the United States, where 10-year Treasuries
traded around 2.067%, and well above the corresponding Bund
yield DE10YT-RR which fell to record lows on Friday near
-0.27%.
    Regional stocks mostly eased as worries over the U.S.-China
trade war and mixed economic data from China weighed on global
stock markets.  The United States is due to release key retail
sales and industrial production data later on Friday.
    If the U.S. figures are weak, they are likely to reinforce
expectations for Federal Reserve interest rate cuts, which have
led to dollar selling in the past weeks, boosting Central
European currencies to multi-month highs.
    The dollar moved sideways against a basket of
currencies on Friday and Central European units were also
treading water.
    The zloty, however, touched a 10-month high
against the euro at 4.253, and the Czech crown a
5-month high at 25.55.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1043 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.5620   25.5600    -0.01%    +0.57%
 crown      >                                       
 Hungary    <EURHUF=  321.8800  322.1400    +0.08%    -0.25%
 forint     >                                       
 Polish     <EURPLN=    4.2555    4.2564    +0.02%    +0.80%
 zloty      >                                       
 Romanian   <EURRON=    4.7225    4.7215    -0.02%    -1.45%
 leu        >                                       
 Croatian   <EURHRK=    7.4110    7.4130    +0.03%    -0.01%
 kuna       >                                       
 Serbian    <EURRSD=  117.8200  118.0000    +0.15%    +0.41%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1046.99  1050.880    -0.37%    +6.13%
                                       0            
 Budapest             40279.81  40469.80    -0.47%    +2.91%
 Warsaw                2285.58   2300.20    -0.64%    +0.39%
 Bucharest             8482.64   8477.19    +0.06%   +14.88%
 Ljubljana  <.SBITOP    868.72    870.12    -0.16%    +8.01%
            >                                       
 Zagreb                1899.80   1901.30    -0.08%    +8.63%
 Belgrade   <.BELEX1    728.54    729.35    -0.11%    -4.35%
            5>                                      
 Sofia                  578.23    578.71    -0.08%    -2.73%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6100    0.0240   +229bps     +4bps
            R>                                      
   5-year   <CZ5YT=R    1.5540    0.0530   +216bps     +7bps
            R>                                      
   10-year  <CZ10YT=    1.5840   -0.0140   +185bps     +1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5970    0.0010   +228bps     +2bps
            R>                                      
   5-year   <PL5YT=R    1.9450   -0.0410   +256bps     -3bps
            R>                                      
   10-year  <PL10YT=    2.4000   -0.0520   +266bps     -3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.17      2.06      1.95      2.17
            <PRIBOR=                                
            >                                       
 Hungary                  0.29      0.44      0.57      0.18
                                                    
 Poland                   1.74      1.73      1.71      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Additional reporting by Jason Hovet in Prague; Editing by
Kirsten Donovan)
  
 
 
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