June 14, 2019 / 1:57 PM / a year ago

CEE MARKETS-Polish bond yield sets 4-year low, currencies rise despite firm dollar

    * Bond yields track core markets lower on politics, growth
    * Poland's 10-year bond yield at lowest since early 2015
    * Regional currencies set multi-month highs, stocks mostly
    * Currencies shrug off dollar rebound on U.S. retail sales

 (Adds U.S. retail sales, new comments)
    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
    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. 
    Other Central European bond yields also dropped, and
currencies mainly firmed slightly, despite a rebound in U.S.
yields and the dollar against major currencies, partly
after better-then-expected U.S. retail sales data.
    In recent weeks, dollar sales have helped the region's main
currencies to firm, and on Friday the zloty touched a
10-month high against the euro at 4.2525, and the Czech crown
 a 9-month high at 25.523.
    "The reverse correlation with the dollar does not work 100
percent. There is hardly any trade in local markets right now,
this is a sleepy Friday," one Budapest-based dealer said.
    "After the retail figures... the first U.S. rate cut may
come later, but the expectation is still for cuts."
    Despite a rise in U.S. Treasury bond yields, German yields
remained lower, though the 10-year yield was off record lows
touched earlier in the session.     
    Although a surge in wages in the region is pushing consumer
prices higher, Poland has the lowest annual inflation among
Central Europe's main economies - revised up to 2.4 percent for
May on Friday.
    Polish rate setter Jerzy Osiatynski said the central bank
may need to start to increase its record low interest rates next
year, but that in 2019 borrowing costs would not
    Hungary's 10-year yield was fixed lower by 5 basis points
from Thursday's fixing at 2.74%.
    The forint firmed 0.1 percent to 321.8 versus the
            CEE       SNAPSHOT   AT                         
            MARKETS             1517 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.5250   25.5600    +0.14%    +0.71%
 crown      >                                       
 Hungary    <EURHUF=  321.8000  322.1400    +0.11%    -0.22%
 forint     >                                       
 Polish     <EURPLN=    4.2559    4.2564    +0.01%    +0.79%
 zloty      >                                       
 Romanian   <EURRON=    4.7225    4.7215    -0.02%    -1.45%
 leu        >                                       
 Croatian   <EURHRK=    7.4120    7.4130    +0.01%    -0.03%
 kuna       >                                       
 Serbian    <EURRSD=  117.9200  118.0000    +0.07%    +0.32%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1049.66  1050.880    -0.12%    +6.40%
 Budapest             40636.65  40469.80    +0.41%    +3.83%
 Warsaw                2289.25   2300.20    -0.48%    +0.55%
 Bucharest             8516.02   8477.19    +0.46%   +15.34%
 Ljubljana  <.SBITOP    871.72    870.12    +0.18%    +8.39%
 Zagreb                1897.72   1901.30    -0.19%    +8.51%
 Belgrade   <.BELEX1    724.20    729.35    -0.71%    -4.92%
 Sofia                  579.80    578.71    +0.19%    -2.47%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.6150    0.0280   +230bps     +5bps
   5-year   <CZ5YT=R    1.5410    0.0390   +214bps     +4bps
   10-year  <CZ10YT=    1.5840   -0.0140   +183bps     -1bps
   2-year   <PL2YT=R    1.5760   -0.0200   +226bps     +1bps
   5-year   <PL5YT=R    1.9660   -0.0200   +257bps     -2bps
   10-year  <PL10YT=    2.4070   -0.0450   +265bps     -4bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.17      2.06      1.95      2.17
 Hungary                  0.29      0.41      0.51      0.18
 Poland                   1.74      1.73      1.71      1.72
 Note: FRA  are for ask prices                              
 (Additional reporting by Jason Hovet in Prague; Editing by
Kirsten Donovan and Gareth Jones)
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