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CEE MARKETS-Bonds rebound on Yellen, but trend change not expected

* 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

BUDAPEST, July 13 (Reuters) - Central European government paper firmed slightly as markets were awash in money ahead of auctions on Thursday and investors expected slower monetary tightening in the United States. Comments from Federal Reserve Chair Janet Yellen late on Wednesday signaled that the Fed's rate hikes, which make Central Europe's debt yields relatively less attractive, could be glacial, at best. Regional yields have risen in the past three weeks as the latest comments from the European Central Bank cemented expectations that a reversal of its monetary easing could be near. Czech, Hungarian and Polish 10-year yields dropped by about 2 basis points on Thursday, with the Polish paper trading at 3.3 percent at 0832 GMT, tracking a similar move in Bunds. Investors in Central Europe closely watched a surge in the Bund yield to 19-month highs, above 0.5 percent in the past weeks. Thursday's regional bond yield drop was only a fraction of the previous rise since late June. Currencies retreated from Wednesday's peaks, indicating that the Fed comments would not become a game changer. The forint traded 0.2 percent weaker against the euro at 307.4 at 0839 GMT, off a 4-week high reached on Wednesday. "The ECB has been trying to calm markets, but it has become obvious that their loose policy cannot be maintained forever," one Budapest-based fixed income trader said. "The baseline (expectation for debt markets) has not changed." While Central European bond yields are mostly higher then euro zone peers, some of the region's markets are also helped by good liquidity. The Hungarian central bank has been pumping liquidity into markets via its unorthodox toolkit in the past year. 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. An auction of 19-month Romanian bonds is expected to draw healthy demand on Thursday, with a likely cut-off yield below Wednesday's closing bid of 1.28 percent, ING analysts said in a note. "With a cautious tone from the Fed's president yesterday, we could still see some positive price action today as well, though ROMGBs have been doing better than peers recently, so maybe there are limited incentives for market participants to chase yields lower," they said. A good supply in Czech crown cash and cheap money from foreign currency swaps could also generate strong demand at a Treasury bill auction in Prague. "It is likely we will be moving again strongly to negative yield, in the first auction in a month and half," a trader said.

CEE MARKETS SNAPSH AT 1039 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.125 26.104 -0.08% 3.38% 0 5 Hungary 307.40 306.75 -0.21% 0.46% forint 00 00 Polish zloty 4.2339 4.2347 +0.02 4.02%

%

Romanian leu 4.5645 4.5657 +0.03 -0.65%

%

Croatian kuna 7.4070 7.4095 +0.03 2.00%

%

Serbian dinar 119.99 120.11 +0.10 2.80% 00 00 % Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 1000.5 999.21 +0.13 +8.56 0 % % Budapest 35852. 35872. -0.06% +12.0 28 46 3% Warsaw 2341.6 2341.5 +0.02 +20.2 5 4 % 1% Bucharest 8173.6 8171.9 +0.02 +15.3 9 6 % 7% Ljubljana 806.13 808.17 -0.25% +12.3

4%

Zagreb 1862.0 1861.5 +0.03 -6.66% 6 6 % Belgrade 714.80 715.46 -0.09% -0.36% Sofia 710.26 711.17 -0.13% +21.1

2% BONDS

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

Republic

2-year 0.05 0.05 +067b +5bps

ps

5-year 0.023 0 +015b +2bps

ps

10-year 0.974 -0.017 +040b +0bps

ps Poland

2-year 1.821 -0.095 +244b -9bps

ps

5-year 2.653 0.01 +278b +3bps

ps

10-year 3.318 -0.008 +275b +0bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.44 0.52 0.61 0

IBOR=>

Hungary <BU 0.21 0.23 0.295 0.15

BOR=>

Poland <WI 1.77 1.79 1.815 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)