* Assets rebound as US yield rally loses steam
* Hungarian bond auction could draw strong demand-trader
* ECB worry on economy could weaken currencies-analysts
By Sandor Peto
BUDAPEST, April 26 (Reuters) - Central European government
bonds and currencies regained some ground as a rally in U.S.
Treasuries yields and the dollar lost steam, ahead of an
expected decision by the European Central Bank to keep policy
unchanged at its monetary meeting on Thursday.
Regional currencies and bonds hit multi-week lows and
equities have weakened in the past few days as the U.S. 10-year
yield reached four-year highs and the dollar firmed.
Poland's 10-year government bond yield dropped four basis
points to 3.078 percent on Thursday and its Romanian peer was
bid lower by 4 basis points.
Hungarian yields dropped 1-2 basis points ahead of the
government's bi-weekly auctions, with 10-year papers trading at
2.55 percent.
The Hungarian central bank's first comments since Prime
Minister Viktor Orban's government party Fidesz got re-elected
on April 8 confirmed that no change is expected in ultra-loose
monetary policy, one Budapest-based fixed income trader said.
Deputy Governor Marton Nagy told Reuters that the bank was
relaxed about domestic inflation trends and was unlikely to
start tightening up its easy monetary policy before the ECB
begins raising rates.
"It is more likely that the NBH will take any steps only
after the ECB moves," he said.
The trader said the government was likely to sell bonds at
the auction at the current or even lower yield levels after a
rise in yields driven by U.S. Treasuries.
"Foreigners have no reason to sell. Short-term yields are
near zero... and they lengthen their portfolio maturity if they
can," the trader said.
The ECB is unlikely to stir markets, although any remarks
showing worry over a recent slowdown in European economies could
weaken the euro against the dollar, market participants
said.
Central Europe's main currencies eased in tandem with the
dollar's global gains in the past days, but the real cause of
their weakening was the rise in U.S. debt yields, one
Budapest-based currency dealer said.
"A further rise in dollar yields could weaken the forint
further, but as I can see that does not continue," the dealer
said.
The forint was flat at 313.25 against the euro at
0808 GMT, still near the seven-week lows it set at 313.55 on
Wednesday.
The Czech crown and the zloty rebounded
and gained about 0.1 percent.
Remarks from the ECB concerning recent poor economic data
"could push EURUSD down and stronger dollar might still weigh on
the zloty," Bank Zachodni WBK analysts said in a note.
Regional equity indices mostly firmed.
Bucharest's index, which has been buoyed by
lucrative dividends, hit a new 10-year high.
Czech broadcaster CME's shares gained more than 4
percent after it announced a new financing deal and a rise in
core profits.
CEE SNAPSHOT AT
MARKETS 1008 CET
CURRENCI
ES
Latest Previous Daily Change
bid close change in 2018
Czech <EURCZK= 25.4300 25.4600 +0.12% +0.44%
crown >
Hungary <EURHUF= 313.2500 313.2100 -0.01% -0.75%
forint >
Polish <EURPLN= 4.2316 4.2340 +0.06% -1.31%
zloty >
Romanian <EURRON= 4.6515 4.6475 -0.09% +0.61%
leu >
Croatian <EURHRK= 7.4220 7.4185 -0.05% +0.11%
kuna >
Serbian <EURRSD= 118.0400 118.1900 +0.13% +0.39%
dinar >
Note: calculated from 1800 CET
daily
change
Latest Previous Daily Change
close change in 2018
Prague 1123.83 1121.670 +0.19% +4.24%
0
Budapest 37973.76 38049.97 -0.20% -3.56%
Warsaw 2264.26 2257.00 +0.32% -8.00%
Bucharest 9028.04 9006.10 +0.24% +16.43%
Ljubljana <.SBITOP 845.63 843.95 +0.20% +4.87%
>
Zagreb 1789.14 1785.79 +0.19% -2.92%
Belgrade <.BELEX1 745.63 746.63 -0.13% -1.86%
5>
Sofia 661.69 663.11 -0.21% -2.33%
BONDS
Yield Yield Spread Daily
(bid) change vs Bund change
in
Czech spread
Republic
2-year <CZ2YT=R 0.7980 0.0350 +134bps +4bps
R>
5-year <CZ5YT=R 1.2270 0.0190 +124bps +3bps
R>
10-year <CZ10YT= 1.7620 -0.0330 +115bps -1bps
RR>
Poland
2-year <PL2YT=R 1.5240 -0.0080 +207bps -1bps
R>
5-year <PL5YT=R 2.3830 -0.0450 +239bps -4bps
R>
10-year <PL10YT= 3.0620 -0.0400 +245bps -2bps
RR>
FORWARD RATE AGREEMEN
T
3x6 6x9 9x12 3M
interban
k
Czech Rep 0.95 1.05 1.20 0.90
<PRIBOR=
>
Hungary 0.07 0.10 0.18 0.03
Poland 1.73 1.75 1.76 1.70
Note: FRA are for ask prices
quotes
*************************************************
*************
(Reporting by Sandor Peto, Editing by William Maclean)
