April 20, 2018 / 1:43 PM / 7 months ago

CEE MARKETS-Bond yields track euro zone rise, forint underperforms

    * Bond yields rise slightly, tracking euro zone peers 
    * Investors ignore Hungarian wage data, tension with
Brussels
    * Croatia shifts to budget surplus, debt declines

 (Adds Soros Foundation possible quitting Hungary, Serbian debt
auction, Croatia's budget improvement)
    By Sandor Peto
    BUDAPEST, April 20 (Reuters) - Central European government
bond yields rose slightly on Friday  after their German peers
hit fresh highs on their way to their biggest weekly rise in
more than two months.
    Germany's 10-year bond yield touched an almost 5-week high
as a surge in oil prices increased inflation expectations.

    Bonds in Romania, where inflation jumped to a 5-year high
last month, were hit hardest, with their yields bid higher by
5-9 basis points.
    Hungary and Poland's 10-year yields rose by 2 basis points
to 2.48 and 3.063 percent respectively, with their yield curve
steepening.   
    Hungary's advance was not linked to either gross wages data,
which again showed double-digit annual growth, or to comments
from Prime Minister Viktor Orban highlighting tension with
Brussels, market participants said.
    The surge in wages is unlikely to boost inflation in the
short term and central bank policy could remain loose, analysts
said.
    Regional currency and debt markets continue to ignore an
East-West divide in the European Union over immigration and the
role of national governments, one Budapest-based fixed income
trader said.
    "We are yet to see if the jostling turns into a street
fight," the trader said.
    Hungary's forint eased 0.1 percent against the
euro by 1342 GMT, while other units in the region were mostly
steady.
    Budapest's bluechip stock index led a decline of
regional equities, shedding almost one percent.
    Political events may have been behind some of those moves,
but the international mood and technical factors were not
supportive either, said Zoltan Varga, analyst of Equilor
Brokerage.
    "The fall is not huge, and turnover is low," he added.
    One factor that may have had an impact was an announcement
from the foundation of Budapest-born financier George Soros,
which said on Friday it was considering its future in Hungary
after enduring repeated attacks from Orban.
    Critics of the right-wing Hungarian government, already the
target of European Union legal action, said a departure of the
liberal Open Society Foundations (OSF) would mark a milestone in
a slide towards authoritarian rule.
    Elsewhere, the dinar was steady after an auction
of 3-year bonds which generated 27 million euros, a third of the
government's offer.
    The kuna was also steady after Croatian statistics
figures showed that the government budget shifted to a surplus
last year, helping public debt decline below 80 percent of
economic output.
    "(The) news is market-positive, though likely already
largely priced in," said Alen Kovac, analyst of Erste Group, in
a note.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1442 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.3500   25.3410    -0.04%    +0.76%
 crown      >                                       
 Hungary    <EURHUF=  310.5200  310.2500    -0.09%    +0.13%
 forint     >                                       
 Polish     <EURPLN=    4.1689    4.1685    -0.01%    +0.18%
 zloty      >                                       
 Romanian   <EURRON=    4.6585    4.6580    -0.01%    +0.46%
 leu        >                                       
 Croatian   <EURHRK=    7.4100    7.4125    +0.03%    +0.27%
 kuna       >                                       
 Serbian    <EURRSD=  118.1000  118.1200    +0.02%    +0.34%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1120.60  1128.100    -0.66%    +3.94%
                                       0            
 Budapest             38297.81  38663.10    -0.94%    -2.74%
 Warsaw                2327.43   2324.73    +0.12%    -5.44%
 Bucharest             8926.83   8952.47    -0.29%   +15.13%
 Ljubljana  <.SBITOP    831.66    836.81    -0.62%    +3.13%
            >                                       
 Zagreb                1789.55   1793.83    -0.24%    -2.89%
 Belgrade   <.BELEX1    739.52    739.80    -0.04%    -2.67%
            5>                                      
 Sofia                  661.44    662.79    -0.20%    -2.36%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.7200   -0.0360   +127bps     -2bps
            R>                                      
   5-year   <CZ5YT=R    1.1880    0.0120   +121bps     +2bps
            R>                                      
   10-year  <CZ10YT=    1.7360   -0.0030   +114bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5360    0.0010   +209bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.3460    0.0010   +237bps     +1bps
            R>                                      
   10-year  <PL10YT=    3.0650    0.0190   +247bps     +2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.95      1.04      1.19      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.10      0.18      0.03
                                                    
 Poland                   1.73      1.75      1.77      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 *************                                      
    

 (Additional reporting by Aleksandar Vasovic in Belgrade)
  
 
 
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