July 19, 2018 / 8:47 AM / 5 months ago

CEE MARKETS-Hungarian bonds buck pressure as traders see good auction

    * Hungarian bond yields stay around multi-week lows
    * Hungarian bond auction is seen drawing healthy demand
    * Worsened global mood weighs on currencies, equities
    * Romanian gas price cut plan knocks down Bucharest stock
index

    By Sandor Peto and Luiza Ilie
    BUDAPEST/BUCHAREST, July 19 (Reuters) - Hungarian government
bond yields traded around their lowest for several weeks on
Thursday, withstanding a rise in yields in core markets and
Central Europe ahead of an auction of bonds in Budapest.
    The sale could draw healthy demand in a market which became
oversold in the past months, even though fears of a global trade
war tainted the mood in world markets, traders said.
    "The (Hungarian) market is still oversold and
under-positioned," the trader added.
    "Auction yields could stay at secondary market levels due to
the worsened (global) mood instead of dropping 3-5 basis points
below them," one Budapest-based fixed income trader said.
    The offer side strengthened a bit in early trade, but bond
yields stayed at their previous close, and lower by 2-3 basis
points from Wednesday's fixing.
    The yields were at multi-week lows, despite a rise in yields
in the United States, Germany, or in Poland.
    The yield on the 10-year benchmark paper, trading at 3.26
percent, was at five-week lows, down more than 50 basis points
from two-year highs reached early this month.
    With the Hungarian central bank keeping interest rates at
record lows, a rally of the dollar and U.S. debt yields in the
second quarter hit Hungarian assets particularly hard amid a
sell-off in emerging markets.
    This month's rebound strengthened the forint from
record lows set beyond 330 versus the euro.
    It traded at 324.61 at 0807, shedding 0.2 percent, just like
the zloty.
    The crown eased 0.1 percent to 25.872, even though
the biggest rise in Czech producer prices in 14 months in June
underpinned expectations that the central bank will need to
increase interest rates further to fight inflation.
    In regional equities markets, Budapest's and Prague's
 main indices were steady, while Bucharest led a
decline of most other indices in the region, shedding 1.2
percent.
    It was knocked down by OMV Petrom and Romgaz
, which fell 2.8 and 3.5 percent, respectively, after
Romania's government said it planned to lower and cap natural
gas prices by 2021.
    State-owned companies like Romgaz have also been hit by a
requirement to pay higher dividends. Lower gas prices might cut
those state revenues, while they may reduce inflation.
    The plan could negatively affect gas producers, Banca
Transilvania analysts said in a note.
    "Moreover, the draft does not take into consideration any
differences between households and industrial consumers, which
generates an even worse context for local producers than the one
before last deregulation," they added.
    The leu traded steady at 4.6547 versus the euro.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1007 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8720   25.8550    -0.07%    -1.28%
 crown      >                                       
 Hungary    <EURHUF=  324.6100  324.0300    -0.18%    -4.22%
 forint     >                                       
 Polish     <EURPLN=    4.3175    4.3088    -0.20%    -3.27%
 zloty      >                                       
 Romanian   <EURRON=    4.6547    4.6545    -0.00%    +0.54%
 leu        >                                       
 Croatian   <EURHRK=    7.3950    7.3910    -0.05%    +0.48%
 kuna       >                                       
 Serbian    <EURRSD=  117.8800  117.9700    +0.08%    +0.53%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1088.27  1087.360    +0.08%    +0.94%
                                       0            
 Budapest             34759.35  34720.31    +0.11%   -11.73%
 Warsaw                2138.07   2149.12    -0.51%   -13.13%
 Bucharest             7904.26   7990.15    -1.07%    +1.94%
 Ljubljana  <.SBITOP    880.79    882.67    -0.21%    +9.23%
            >                                       
 Zagreb                1794.18   1795.49    -0.07%    -2.64%
 Belgrade   <.BELEX1    736.29    742.52    -0.84%    -3.09%
            5>                                      
 Sofia                  628.34    628.47    -0.02%    -7.25%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.0870    0.0580   +173bps     +7bps
            R>                                      
   5-year   <CZ5YT=R    1.5370    0.0080   +180bps     +0bps
            R>                                      
   10-year  <CZ10YT=    2.1000   -0.0020   +175bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6270    0.0040   +227bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.5040    0.0170   +277bps     +1bps
            R>                                      
   10-year  <PL10YT=    3.1550    0.0360   +280bps     +3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.44      1.65      1.77      1.18
            <PRIBOR=                                
            >                                       
 Hungary                  0.44      0.69      0.85      0.26
                                                    
 Poland                   1.73      1.78      1.80      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto, Editing by William Maclean)
  
 
 
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