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CEE MARKETS-Bonds rebound on Yellen, auctions draw strong demand

* Long-term yields drop as Yellen projects slow tightening

* Comments unlikely to end debt yield rise trend - traders

* Romanian, Czech auctions helped by high market liquidity

(Adds auction results) BUDAPEST, July 13 (Reuters) - The Czech Republic sold 8-week Treasury bills at the lowest ever yield and Central European government paper firmed on Thursday as markets were awash with money and investors expected slower monetary tightening in the United States. Comments from Federal Reserve Chair Janet Yellen late on Wednesday signalled that the Fed's rate hikes, which make Central Europe's debt yields relatively less attractive, could be glacial, at best. Bond yields, which in the past weeks tracked a surge in 10-year Bund yields above 0.5 percent, mostly dropped by a few basis points in the region's main markets. Hungary fixed its 10-year benchmark yield at 3.09 percent, down 4 basis points. Regional currencies were mixed, with the forint retreating slightly from off a 4-week high reached against the euro on Wednesday, while the zloty gained 0.1 percent The Fed comments do not represent a game changer and investors continue to watch the European Central Bank whose hawkish comments boosted bond yields in the region and in the euro zone since late June, one fixed income trader said. "The ECB has been trying to calm markets, but it has become obvious that their loose policy cannot be maintained forever," the Budapest-based trader said. While Central European bond yields are mostly higher then euro zone peers, some of the region's markets are also helped by good liquidity. Debt auctions held in Budapest, Bucharest and Prague on Thursday drew robust demand, which pushed yields lower. The Hungarian central bank has been pumping liquidity into markets via its unorthodox toolkit in the past year. The government sold 12-month Treasury bills at an average yield of 0.09 percent, down from 0.11 percent at an auction two weeks ago. A Reuters poll of analysts showed on Thursday that the central bank could keep its record low base rate on hold at least until the end of 2018 and that the 3-month BUBOR rate could rise only marginally in the next 12 months.

In Romania, large debt redemptions supported government bonds despite worries that the government's policies will lead to a jump in the budget deficit and inflation. The highest yield at which 19-month bonds were sold at Romania's auction was 1.22 percent, below Wednesday's closing bid of 1.28 percent. Cash from a Czech Treasury bill redemption in June helped the country sell 8-week bills at a new yield low of -0.4 percent at an auction.

CEE MARKETS SNAPSH AT 1526 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.114 26.104 -0.04% 3.42% 0 5 Hungary 307.00 306.75 -0.08% 0.59% forint 00 00 Polish zloty 4.2300 4.2347 +0.11 4.11%

%

Romanian leu 4.5636 4.5657 +0.05 -0.63%

%

Croatian kuna 7.4045 7.4095 +0.07 2.03%

%

Serbian dinar 120.01 120.11 +0.08 2.78% 00 00 % Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 999.83 999.21 +0.06 +8.49 % % Budapest 36090. 35872. +0.61 +12.7 53 46 % 7% Warsaw 2339.6 2341.5 -0.08% +20.1 1 4 1% Bucharest 8144.8 8171.9 -0.33% +14.9 5 6 6% Ljubljana 809.17 808.17 +0.12 +12.7 % 6% Zagreb 1856.6 1861.5 -0.27% -6.93% 0 6 Belgrade 713.63 715.46 -0.26% -0.52% Sofia 710.23 711.17 -0.13% +21.1

1% BONDS

Yield Yield Spread Daily (bid) change vs change Bund in Czech spread

Republic

2-year -0.165 -0.164 +045b -17bps

ps

5-year 0.097 0.05 +020b +4bps

ps

10-year 0.962 -0.028 +037b -4bps

ps Poland

2-year 1.826 -0.105 +244b -11bps

ps

5-year 2.659 -0.009 +276b -1bps

ps

10-year 3.329 0.003 +274b -1bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.44 0.52 0.61 0

IBOR=>

Hungary <BU 0.195 0.225 0.295 0.15

BOR=>

Poland <WI 1.747 1.766 1.809 1.73

BOR=>

Note: FRA are for ask quotes prices ********************************************************** ****

(Additional reporting by Luiza Ilie in Bucharest, Jason Hovet in Prague; Editing by Alison Williams/Keith Weir)