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CEE MARKETS-Polish yields drop on balanced budget plan, Czech auction eyed

PRAGUE, Aug 28 (Reuters) - Polish bond yields dropped on Wednesday after the government approved plans to eliminate a budget deficit next year for the first time in three decades. Czech yields were mixed before the first auction in over a month. Polish yields fell 2-6 basis points along the curve with expectations of lower supply in the future, with a 10-year benchmark down to 1.775%. first time since 1990. "A balanced budget will serve as an anchor for future actions and could be treated as a positive information for investors," Santander Bank Polska said in a note. It added demand was strong in the mid- to long-end of the curve. In Czech markets, yields on the 5- to 10-year debt ticked lower. The Finance Ministry will auction bonds due in 2023 and 2033 on Wednesday, and Komercni Banka rates trader Dalimil Vyskovsky said a drop in interest rate swaps this week would help drive demand for the longer bonds. The yield on that bond was steady in early trading, bid at 1.166%. Currencies in the region weakened, led by a multi-month low for the Hungarian forint. The forint was bid down at 329.79 to the euro at 0822 GMT, extending a losing streak this month that has put it at a 13-month low. The National Bank of Hungary left interest rates unchanged on Tuesday, as expected, amid slowing domestic inflation, a worsening euro zone economic outlook and global monetary easing. Analysts expect Hungarian interest rates to remain on hold this year and next, according to an August Reuters poll. Brokerage Equilor said the forint was still prone to further weakening and could test the key psychological level of 330. However, Raiffeisen analysts said the forint, which like other currencies in the region has been caught up in worries over the U.S.-China trade war, could eventually turn around this quarter. "Fundamentals in Hungary are supportive of the local currency and hence, we believe that the forint will revert back to our target of EUR/HUF 320 at end of the third quarter," the bank said in a trading note.

CEE SNAPSHO ATMARKETS T 1022

CET CURRENC IES

Latest Previou Daily Change

s

bid close change in 2019EURCZK Czech <EURCZK 25.8420 25.8335 -0.03% -0.52%= crown =>EURHUF Hungary <EURHUF 329.790 329.515 -0.08% -2.64%= forint => 0 0EURPLN Polish <EURPLN 4.3801 4.3783 -0.04% -2.07%= zloty =>EURRON Romanian <EURRON 4.7365 4.7335 -0.06% -1.74%= leu =>EURHRK Croatian <EURHRK 7.4010 7.4023 +0.02% +0.12%= kuna =>EURRSD Serbian <EURRSD 117.640 117.760 +0.10% +0.56%= dinar => 0 0Note: calculated from 1800daily CET

change

Latest Previou Daily Change

s

close change in 2019.PX Prague 1031.94 1034.13 -0.21% +4.60%

00

.BUX Budapest 38961.5 39107.9 -0.37% -0.45%8 4.WIG20 Warsaw <.WIG20 2099.08 2095.45 +0.17% -7.80%>.BETI Buchares 9233.36 9258.55 -0.27% +25.05t %.SBITO Ljubljan <.SBITO 850.99 854.15 -0.37% +5.81%P a P>.CRBEX Zagreb <.CRBEX 1871.05 1872.87 -0.10% +6.99%>.BELEX Belgrade <.BELEX 748.00 749.66 -0.22% -1.80%15 15>.SOFIX Sofia <.SOFIX 572.99 572.87 +0.02% -3.61%>

BONDS

Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

CZ2YT= 2-year <CZ2YT= 1.0710 0.0310 +196bp +3bpsRR RR> sCZ5YT= 5-year <CZ5YT= 0.7750 -0.0390 +169bp -4bpsRR RR> sCZ10YT <CZ10YT 1.0270 -0.0090 +173bp +0bps=RR 10-year =RR> s

Poland

PL2YT= 2-year <PL2YT= 1.5110 -0.0510 +240bp -5bpsRR RR> sPL5YT= 5-year <PL5YT= 1.5810 -0.0210 +250bp -2bpsRR RR> sPL10YT <PL10YT 1.7750 -0.0550 +248bp -5bps=RR 10-year =RR> sFORWARD RATE AGREEME

NT

3x6 6x9 9x12 3M

interba nk

Czech <CZKFRA 2.08 1.86 1.67 2.14Rep ><PRIBO

R=>

Hungary <HUFFRA 0.27 0.30 0.30 0.26><BUBOR

=>

Poland <PLNFRA 1.70 1.65 1.59 1.72><WIBOR

=>

Note: are for askFRA prices

quotes

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(Reporting by Jason Hovet in Prague, Alan Charlish in Warsaw and Krisztina Than in Budapest)