September 13, 2018 / 9:00 AM / 10 days ago

CEE MARKETS-Bonds mostly ease ahead of Hungarian auction, ECB meeting

    * Bond yields ease ahead of Hungarian bond auction
    * Forint rebounds after European politics-triggered decline
    * ECB, Turkish central bank meetings are eyed
    * Romanian bonds steady ahead of tender despite CPI rebound

    By Sandor Peto
    BUDAPEST, Sept 13 (Reuters) - Central European government
bonds mostly eased on Thursday ahead of auctions in Hungary and
Romania, with investors holding their breath as Turkish and euro
zone rate setters met.
    Regional currencies were slightly in the red or flat as the
dollar attracted some buyers after its retreat on
Wednesday.
    After a plunge of the lira caused some selling in
Central Europe's main currencies last month, they may firm if
Turkey's central bank hikes its rates enough to shore up the
lira, analysts said.
    The European Central Bank is seen keeping rates on hold. It
is not making significant tweaks in its guidance to stay on
course to end its monetary stimulus this year and raise interest
rates next autumn.
    While euro zone government bonds yields were mostly stable
ahead of the ECB's meeting, yields in Central Europe mostly rose
by a few basis points.
    The yield on Hungary's 10-year bonds traded at a one-month
high at 3.59 percent, up 2 basis points ahead of the
government's bi-weekly bond auction.
    Positioning ahead of the primary sale is driving up yields,
rather than a decision made by the European Parliament on
Wednesday to initiate a punitive procedure against Hungary for
flouting democracy, one Budapest-based trader said.
    "It is just political noise over a lengthy story," the
trader added.
    The forint traded marginally weaker against the
euro at 325.4 at 0809 GMT, but off the 4-month lows of 326.4 it
set after the parliament decision.  
    Poland, against which a similar procedure is under way, said
it would block any sanctions against Hungary.

    The zloty eased 0.1 percent to 4.313 versus the
euro, and Poland's benchmark 10-year bond yield was bid at 3.267
percent, up 4 basis points.
    Romanian government bonds were steady ahead of an auction of
two-year papers, the first primary sale since August inflation
figures released on Tuesday showed a rebound in the annual rate
to above 5 percent after a retreat in July.
    July's decline from June's 5-year high of 5.4 percent
contributed to a shift towards less hawkish rhetoric from the
Romanian central bank (NBR).
    The renewed rise is unlikely to make the bank change its
guidance.
    "I do not think the rise will push NBR to hike (interest
rates again) this year," Ciprian Dascalu, chief economist of ING
in Romania, told Reuters.
    "They will rather play via liquidity management if needed to
keep the EUR/RON rather stable given the high FX pass-through 
into CPI," he said, referring to the risk of a leu weakening
causing additional inflation.
    Czech 5-year bond yields bid around 1.84
percent, up 3 basis points, at their highest level since June
2013.
    The Czech central bank is widely expected to increase its
interest rates further at its meeting on Sept. 26. 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1009 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.5860   25.5850    -0.00%    -0.17%
 crown      >                                       
 Hungary    <EURHUF=  325.4000  325.2300    -0.05%    -4.45%
 forint     >                                       
 Polish     <EURPLN=    4.3130    4.3099    -0.07%    -3.17%
 zloty      >                                       
 Romanian   <EURRON=    4.6365    4.6376    +0.02%    +0.93%
 leu        >                                       
 Croatian   <EURHRK=    7.4347    7.4343    -0.01%    -0.06%
 kuna       >                                       
 Serbian    <EURRSD=  118.1200  118.3400    +0.19%    +0.32%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1094.19  1089.310    +0.45%    +1.49%
                                       0            
 Budapest             36088.48  36104.07    -0.04%    -8.35%
 Warsaw                2226.60   2210.16    +0.74%    -9.53%
 Bucharest             8247.20   8261.86    -0.18%    +6.36%
 Ljubljana  <.SBITOP    855.17    858.03    -0.33%    +6.05%
            >                                       
 Zagreb                1808.96   1810.86    -0.10%    -1.84%
 Belgrade   <.BELEX1    723.14    723.53    -0.05%    -4.82%
            5>                                      
 Sofia                  630.23    631.44    -0.19%    -6.97%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.5700    0.1550   +213bps    +16bps
            R>                                      
   5-year   <CZ5YT=R    1.8410    0.0280   +204bps     +3bps
            R>                                      
   10-year  <CZ10YT=    2.1670    0.0030   +175bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6420    0.0020   +220bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.5770    0.0190   +278bps     +2bps
            R>                                      
   10-year  <PL10YT=    3.2670    0.0370   +285bps     +4bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.92      2.11      2.22      1.53
            <PRIBOR=                                
            >                                       
 Hungary                  0.62      0.85      1.07      0.21
                                                    
 Poland                   1.76      1.79      1.84      1.71
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Additional reporting by Luiza Ilie in Bucharest
Editing by Peter Graff)
  
 
 
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