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CEE MARKETS-Polish bond yield sets 4-year low, currencies rise despite firm dollar

Sandor Peto and Alicja Ptak

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* Bond yields track core markets lower on politics, growth worries

* Poland's 10-year bond yield at lowest since early 2015

* Regional currencies set multi-month highs, stocks mostly ease

* Currencies shrug off dollar rebound on U.S. retail sales data

(Adds U.S. retail sales, new comments) BUDAPEST/WARSAW, June 14 (Reuters) - Poland's 10-year government bond yield sank to its lowest level in more than four years on Friday after an attack on two oil tankers in the Gulf, which the United States blamed on Iran, led to global buying of less risky assets. Tehran denied the allegation following the attacks on Thursday, but concerns grew about a new U.S.-Iranian confrontation. The Polish paper traded at 2.3895% at 0843 GMT, down 3 basis points from Thursday's close. "(There is a) big drop in yields worldwide, (and) the rising presence of foreign investors dragged (Polish) yields down," said Michal Zak, dealer at mBank. "Yesterday's (Polish government bond) auction apparently has not covered all positions, if only a day after we see a 10 basis point drop," he added, referring to the fall in yield from Thursday's peak. Other Central European bond yields also dropped, and currencies mainly firmed slightly, despite a rebound in U.S. yields and the dollar against major currencies, partly after better-then-expected U.S. retail sales data. In recent weeks, dollar sales have helped the region's main currencies to firm, and on Friday the zloty touched a 10-month high against the euro at 4.2525, and the Czech crown a 9-month high at 25.523. "The reverse correlation with the dollar does not work 100 percent. There is hardly any trade in local markets right now, this is a sleepy Friday," one Budapest-based dealer said. "After the retail figures... the first U.S. rate cut may come later, but the expectation is still for cuts." Despite a rise in U.S. Treasury bond yields, German yields remained lower, though the 10-year yield was off record lows touched earlier in the session. Although a surge in wages in the region is pushing consumer prices higher, Poland has the lowest annual inflation among Central Europe's main economies - revised up to 2.4 percent for May on Friday. Polish rate setter Jerzy Osiatynski said the central bank may need to start to increase its record low interest rates next year, but that in 2019 borrowing costs would not change. Hungary's 10-year yield was fixed lower by 5 basis points from Thursday's fixing at 2.74%. The forint firmed 0.1 percent to 321.8 versus the euro.

CEE SNAPSHOT ATMARKETS 1517 CET

CURRENCI ES

Latest Previous Daily Changebid close change in 2019Czech <EURCZK= 25.5250 25.5600 +0.14% +0.71%crown >Hungary <EURHUF= 321.8000 322.1400 +0.11% -0.22%forint >Polish <EURPLN= 4.2559 4.2564 +0.01% +0.79%zloty >Romanian <EURRON= 4.7225 4.7215 -0.02% -1.45%leu >Croatian <EURHRK= 7.4120 7.4130 +0.01% -0.03%kuna >Serbian <EURRSD= 117.9200 118.0000 +0.07% +0.32%dinar >Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2019Prague 1049.66 1050.880 -0.12% +6.40%

0

Budapest 40636.65 40469.80 +0.41% +3.83%Warsaw 2289.25 2300.20 -0.48% +0.55%Bucharest 8516.02 8477.19 +0.46% +15.34%Ljubljana <.SBITOP 871.72 870.12 +0.18% +8.39%>Zagreb 1897.72 1901.30 -0.19% +8.51%Belgrade <.BELEX1 724.20 729.35 -0.71% -4.92%

5>

Sofia 579.80 578.71 +0.19% -2.47%

BONDS

Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 1.6150 0.0280 +230bps +5bps

R>

5-year <CZ5YT=R 1.5410 0.0390 +214bps +4bps

R>

10-year <CZ10YT 1.5840 -0.0140 +183bps -1bps

RR> Poland

2-year <PL2YT=R 1.5760 -0.0200 +226bps +1bps

R>

5-year <PL5YT=R 1.9660 -0.0200 +257bps -2bps

R>

10-year <PL10YT= 2.4070 -0.0450 +265bps -4bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 2.17 2.06 1.95 2.17

<PRIBOR=

>

Hungary 0.29 0.41 0.51 0.18Poland 1.74 1.73 1.71 1.72

Note: FRA are for ask prices quotes

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(Additional reporting by Jason Hovet in Prague; Editing by Kirsten Donovan and Gareth Jones)