April 25, 2018 / 9:22 AM / 7 months ago

CEE MARKETS-Bonds, currencies ease further, await ECB guidance

    * Forint, zloty, LT bonds ease as U.S. 10-year yield pierces
3 pct
    * Crown bucks trend as central bankers hint at further rate
rise
    * Stocks mostly ease, but Bucharest .BETI hits another 10-yr
high

    By Sandor Peto and Marcin Goettig
    BUDAPEST/WARSAW, April 25 (Reuters) - Central European
currencies and long-term government bonds traded near this
month's weakest levels on Wednesday after the U.S. 10-year
Treasury yield broke through the 3-percent level.
    Investors have closely watched the past few weeks' rally in
yields in the United States and in the euro zone, as higher
yields there make assets in emerging markets relatively less
attractive.
    Poland's 10-year bond yield rose five basis points to 3.14
percent.
    A bond dealer in Warsaw said debt expiries and limited
supply may mute the impact from abroad.
    "This may generate demand for bonds from banks who do not
want to hold too much cash," the trader added. 
    Czech, Hungarian and Romanian long-term yields also rose by
1-2 basis points.
    Investors now watch if core market yield have momentum left
to rise further and wait for signals from the European Central
Bank's (ECB) Thursday meeting, one Budapest-based fixed income
trader said.
    "(U.S. yields) are at critical levels and the question is if
they go further up as no resistance is in sight," the trader
said.
    "I would say the correlation (of Central European bonds)
with Bunds is stronger... From (ECB President Mario) Draghi, the
market expects dovish comments," the trader added.
    Global market trends have often overshadowed differences in
monetary policies in the rapidly-growing Central European
economies in the past months.
    The crown, the forint and the zloty
 slipped to four-week lows from 2-month highs since the
middle of April.
    Continuing flows into the dollar weakened the forint and the
zloty, the region's most liquid units, by 0.1 percent in their
euro cross by 0849 GMT.
    But the crown rebounded, firming a shade to 25.454 against
the euro, after two Czech rate setter indicated that interest
rate hikes which started last year can continue.
    Vojtech Benda, a hawkish rate setter told Reuters on Tuesday
that he saw no reason to hike rates at the bank's May 3 meeting,
but risks were "rather in the inflationary side".
    Another rate setter, Tomas Nidetzy was quoted on Wednesday
as saying that no action was needed yet, but the bank was likely
to deliver one more rate hike this year.
    Regional equities mostly dropped slightly, tracking a global
trend driven by concerns over the U.S. yield rise.
    Bucharest's main index, however, rising marginally,
set a new 10-year high. It has outperformed regional peers,
partly driven by bigger-than-expected dividends.
    Banca Transilvania shares rose 0.6 percent, after
the bank reported a 49-percent annual surge in its first-quarter
profits.   
            CEE       SNAPSHOT   AT                         
            MARKETS             1049 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4540   25.4620    +0.03%    +0.35%
 crown      >                                       
 Hungary    <EURHUF=  312.9800  312.6200    -0.12%    -0.66%
 forint     >                                       
 Polish     <EURPLN=    4.2146    4.2090    -0.13%    -0.91%
 zloty      >                                       
 Romanian   <EURRON=    4.6499    4.6510    +0.02%    +0.64%
 leu        >                                       
 Croatian   <EURHRK=    7.4180    7.4170    -0.01%    +0.17%
 kuna       >                                       
 Serbian    <EURRSD=  118.0900  118.1900    +0.08%    +0.35%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1126.63  1127.530    -0.08%    +4.50%
                                       0            
 Budapest             37828.65  37892.90    -0.17%    -3.93%
 Warsaw                2258.19   2269.06    -0.48%    -8.25%
 Bucharest             9014.90   9005.21    +0.11%   +16.27%
 Ljubljana  <.SBITOP    839.28    836.80    +0.30%    +4.08%
            >                                       
 Zagreb                1783.80   1788.71    -0.27%    -3.21%
 Belgrade   <.BELEX1    739.49    741.91    -0.33%    -2.67%
            5>                                      
 Sofia                  660.47    659.10    +0.21%    -2.51%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.7630   -0.1350   +129bps    -14bps
            R>                                      
   5-year   <CZ5YT=R    1.2260    0.0180   +122bps     +1bps
            R>                                      
   10-year  <CZ10YT=    1.7670    0.0080   +112bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5460    0.0160   +208bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.4510    0.0520   +244bps     +4bps
            R>                                      
   10-year  <PL10YT=    3.1650    0.0720   +252bps     +6bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.95      1.05      1.19      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.08      0.10      0.18      0.03
                                                    
 Poland                   1.74      1.75      1.77      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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