October 11, 2018 / 3:17 PM / 9 days ago

CEE MARKETS-Bonds auctions draw strong demand, stocks track global sell-off

    * Hungary, Bucharest sells more bonds than planned at
auctions
    * Recent yield rise, driven by USTs, helps CEE bonds
    * Warsaw stocks set 3-month low, global fall grips CEE
shares

 (Adds results of Hungary and Romania's government bond
auctions)
    By Sandor Peto
    BUDAPEST, Oct 11 (Reuters) - Central European government
bonds mostly rebounded on Thursday as Hungary and Romania's
auctions drew strong demand after a recent rise in yields, while
a global sell-off hit regional stocks.
    A jump in U.S. Treasury yields boosted medium and long-term
yields in the region as well in recent days, mainly in Hungary
where the central bank has Central Europe's lowest short-term
interest rates. 
    But the 10-year U.S. yield retreated by the
early hours in European trade, and stayed low after U.S. figures
later in the day showed a slowdown in inflation in September.
    The data, slightly below forecasts, make it unlikely that
the Federal Reserve accelerates its rate hikes. This is positive
for Central European bonds, as higher U.S. rates would make them
relatively less attractive.
    October's government bond yield rises, which boosted
Hungary's 10-year yield by late Wednesday to its highest level
since the middle of 2015, boosted appetite at tenders in
Budapest and Bucharest on Thursday.
    Hungary sold bonds worth 108 billion forints at its
auctions, almost twice as much as originally planned.
    "Demand was high because yields were high," one
Budapest-based fixed income trader said.
    "It is hard to say who wanted to buy the bonds: some of them
may have closed shorts, but other may have been outright
buyers," the trader added.
    Hungary's 10-year bond yield traded at 3.89 percent late in
the session, 2 basis points above the average auction yield, but
down 2 basis points from Wednesday's midday fixing.
    Romania also sold more 2-year bonds than planned at its
tender, at an average yield of 4.07 percent, up 17 basis points
from a sale four weeks ago.
    Czech and Polish 5 and 10-year bond yields were bid lower by
2-4 basis points and the longer Polish paper trading
at 3.275 percent, down 4 basis points.  
    The forint and the Czech crown firmed
0.1 percent against the euro by 1428 GMT as the dollar
was sold in global markets.
    But the region's main equities indices fell to multi-week
lows as sentiment soured due to a plunge in stocks on Wall
Street and in Asia.
    The global sell-off was partly caused by comments from
International Monetary Fund head Christine Lagarde who said
stock market valuations had been "extremely high".
    Budapest led the fall, with its main index shedding
1.8 percent to a two-week low. 
    Warsaw's bluechip index touched a 3-month low and
eased 1.4 percent.
    Poland's top fashion retailer LPP shares fell
almost 4 percent to a 10-month low.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1628 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8330   25.8640    +0.12%    -1.13%
 crown      >                                       
 Hungary    <EURHUF=  324.8500  325.3000    +0.14%    -4.29%
 forint     >                                       
 Polish     <EURPLN=    4.3090    4.3115    +0.06%    -3.08%
 zloty      >                                       
 Romanian   <EURRON=    4.6662    4.6670    +0.02%    +0.29%
 leu        >                                       
 Croatian   <EURHRK=    7.4170    7.4095    -0.10%    +0.18%
 kuna       >                                       
 Serbian    <EURRSD=  118.2500  118.3200    +0.06%    +0.21%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1083.68  1097.170    -1.23%    +0.51%
                                       0            
 Budapest             36150.59  36821.12    -1.82%    -8.19%
 Warsaw                2166.23   2197.34    -1.42%   -11.99%
 Bucharest             8402.29   8487.88    -1.01%    +8.36%
 Ljubljana  <.SBITOP    818.80    830.31    -1.39%    +1.54%
            >                                       
 Zagreb                1754.55   1770.15    -0.88%    -4.79%
 Belgrade   <.BELEX1    731.90    732.50    -0.08%    -3.67%
            5>                                      
 Sofia                  609.09    617.42    -1.35%   -10.09%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6560    0.0950   +222bps    +11bps
            R>                                      
   5-year   <CZ5YT=R    1.8340   -0.0350   +195bps     -1bps
            R>                                      
   10-year  <CZ10YT=    2.1310   -0.0390   +161bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6050   -0.0250   +217bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.5840   -0.0320   +270bps     -1bps
            R>                                      
   10-year  <PL10YT=    3.3040   -0.0160   +278bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.02      2.20      2.33      1.75
            <PRIBOR=                                
            >                                       
 Hungary                  0.48      0.81      1.14      0.17
                                                    
 Poland                   1.76      1.83      1.88      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Additional reporting by Anna Koper in Warsaw,
Editing by Raissa Kasolowsky and Ed Osmond)
  
 
 
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