August 1, 2018 / 9:47 AM / 4 months ago

CEE MARKETS-Polish bond yields ease, manufacturing mood sours in July

    * Czech, Polish July PMIs show some slowdown in economic
activity
    * Polish bond yields drop, bucking rise in euro zone, CEE
    * Forint retreats from seven-week high as dollar gains 

    By Sandor Peto
    BUDAPEST, Aug 1 (Reuters) - Polish government bond yields
dropped on Wednesday, bucking a rise in euro zone yields, after
the finance ministry said on Tuesday that it would not sell
bonds in August, apart from a switch tender.
    The yield on Poland's 10-year government bonds
was bid lower by 5 basis points at 3.14 percent. The
corresponding Bund yield was up 3 basis points at
0.47 percent
    Yields in the euro zone and Central Europe mostly rose,
driven by a jump in Japan's 10-year yield after Bank of Japan
Governor Haruhiko Kuroda said yields would be allowed to move
more flexibly.  
    Czech and Hungarian 10-year yields rose 1 to 2 basis points.
 Czech five- and two-year yields rose 6 to 7 basis points.
    The Czech central bank is expected to raise interest rates
for the fifth time since August 2017 at its meeting on Thursday,
to fight a pick-up in inflation and create room in its interest
rates in case of a possible economic slowdown.
    The region's economies have been growing robustly, at rates
around 4 percent.
    July PMI manufacturing sentiment indices released on
Wednesday showed some slowdown in economic activity in the Czech
Republic and Poland.    
    The figures did not change expectations for Czech rate hikes
to come and for continued loose monetary policy in Poland, which
reported 2 percent annual inflation for July on Tuesday, well
within the central bank's 1.5 to 3.5 percent target range.
    The Czech crown remained stuck near 25.6 to the
euro. The forint retreated from Wednesday's seven-week
lows, to trade at 321.24, weaker by 0.3 percent.
    In slow holiday-time trading in the region, the forint is
unlikely to strengthen past the 320 line or weaken beyond 323 in
the next days, one Budapest-based currency dealer said.
    "It is moved by the euro/dollar cross now, weakening as the
dollar has firmed," the dealer added.
    Regional currencies rebounded in the past weeks from months
of weakening caused by flows into the dollar, which rallied in
the second quarter.
    Wednesday's slightly more negative global sentiment, also
marred by global trade war fears, may mean that yields will 
rise 1 to 2 basis points at Hungary's bond auctions on Thursday
relative to the current secondary market levels, one fixed
income trader said.
    Hungary's 10-year bonds trade at yields around 3.24 percent.
    The region's equity indices were mixed, with their daily
change not exceeding a third of a percent.   
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1043 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.5870   25.5890    +0.01%    -0.18%
 crown      >                                       
 Hungary    <EURHUF=  321.2400  320.3500    -0.28%    -3.21%
 forint     >                                       
 Polish     <EURPLN=    4.2742    4.2758    +0.04%    -2.29%
 zloty      >                                       
 Romanian   <EURRON=    4.6260    4.6215    -0.10%    +1.16%
 leu        >                                       
 Croatian   <EURHRK=    7.3990    7.4010    +0.03%    +0.42%
 kuna       >                                       
 Serbian    <EURRSD=  117.8900  118.0000    +0.09%    +0.52%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1093.82  1092.340    +0.14%    +1.45%
                                       0            
 Budapest             35850.51  35742.06    +0.30%    -8.96%
 Warsaw                2299.12   2302.13    -0.13%    -6.59%
 Bucharest             7998.18   7977.74    +0.26%    +3.15%
 Ljubljana  <.SBITOP    888.16    887.47    +0.08%   +10.14%
            >                                       
 Zagreb                1814.71   1820.01    -0.29%    -1.53%
 Belgrade   <.BELEX1    737.95    738.97    -0.14%    -2.88%
            5>                                      
 Sofia                  633.61    634.03    -0.07%    -6.47%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.3050    0.0670   +188bps     +6bps
            R>                                      
   5-year   <CZ5YT=R    1.7730    0.0620   +194bps     +4bps
            R>                                      
   10-year  <CZ10YT=    2.2140    0.0130   +174bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6230   -0.0170   +219bps     -3bps
            R>                                      
   5-year   <PL5YT=R    2.4960   -0.0390   +266bps     -6bps
            R>                                      
   10-year  <PL10YT=    3.1370   -0.0500   +267bps     -8bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.44      1.65      1.77      1.22
            <PRIBOR=                                
            >                                       
 Hungary                  0.35      0.57      0.77      0.17
                                                    
 Poland                   1.75      1.77      1.82      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 (Reporting by Sandor Peto, editing by Larry King)
  
 
 
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