January 3, 2019 / 3:37 PM / 6 months ago

CEE MARKETS-Hungarian long-term debt yields slide further on growth fears

    * Hungary's 10-year bond sale draws strongest demand in 11
    * Fall in Hungary's IRSs, growth worry support long-term CEE
    * Polish assets ease, central bank chief to be questioned

 (Recasts with Hungarian auction results, trader comments)
    By Sandor Peto and Alicja Ptak
    BUDAPEST/WARSAW, Jan 3 (Reuters) - Hungary's long-term
government bond yields dropped to new multi-month lows on
Thursday as expectations for slower growth and lower inflation
and interest rates in the world boosted demand at the country's
first bond auction in 2019.
    "That is coupled with the a plunge in (Hungarian) interest
rate swaps at the end of last year," one Budapest-based fixed
income trader said.
    "That has made asset swap packages, that is government bond
buying hedged through interest rate swaps, very attractive," the
trader added.
    Demand soared for long-term bonds. Together with a top-up
auction, the government sold 108.5 billion forints ($384.6
million) worth of 3-, 5-, and 10-year papers, above its 70
billion forint offer which was already high relative to the past
months' auctions.
    Bids for the 10-year bond totalled 127.7 billion forints,
the highest since 2008.
    The paper was sold at an average 2.76 percent, its lowest
yield in eight months, down 10 basis points from Wednesday and
by half a percentage point since the middle of December.
    Long-term bond yields in the United States, Germany and the
biggest Central European economy, Poland, have also declined in
the past weeks.
    That trend got support on Wednesday from weak manufacturing
data released in the biggest emerging economy, China, and also
in Poland and the Czech Republic.
    Poland's 10-year bond yield, however, took a breather on
Thursday after the past weeks' sharp decline, just like its
German peer, and rose one basis point to 2.77 percent.
    "The rise in (Polish bond) yields could have something to do
with the rising oil prices in the past two days, which
translates into moves on core markets and Polish bonds," said
Rafal Benecki, chief economist of ING in Poland.   
    The corresponding Czech yield, meanwhile, continued to fall,
and set a one-year low at 1.66 percent.   
    Global growth worries, also fuelled by a revenue warning
from Apple have weighed on Central European currencies
in the first days of the year and caused jitters in the region's
stock markets as holidays kept turnover thin.
    On Thursday, regional markets were mixed.
    The zloty eased 0.1 percent versus the euro, but
trading at 4.2979 at 1446 GMT it rebounded from early lows on
the weaker side of the 4.3 line.
    The Czech crown, meanwhile, firmed a quarter of a
percent to 25.706.
    Warsaw's bluechip equity index fell 2.1 percent,
piercing its 90-day moving average.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1546 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7060   25.7760    +0.27%    +0.00%
 crown      >                                       
 Hungary    <EURHUF=  322.0000  322.2500    +0.08%    -0.28%
 forint     >                                       
 Polish     <EURPLN=    4.2979    4.2925    -0.13%    -0.19%
 zloty      >                                       
 Romanian   <EURRON=    4.6650    4.6576    -0.16%    -0.24%
 leu        >                                       
 Croatian   <EURHRK=    7.4330    7.4200    -0.17%    -0.31%
 kuna       >                                       
 Serbian    <EURRSD=  118.2600  118.4000    +0.12%    +0.03%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                 992.37  989.3700    +0.30%    +0.59%
 Budapest             39851.52  39734.06    +0.30%    +1.82%
 Warsaw                2252.75   2301.62    -2.12%    -1.05%
 Bucharest             7477.99   7383.68    +1.28%    +1.28%
 Ljubljana  <.SBITOP    803.77    804.26    -0.06%    -0.06%
 Zagreb                1724.15   1729.39    -0.30%    -1.41%
 Belgrade   <.BELEX1    731.79    761.69    -3.93%    -3.93%
 Sofia                  586.08    586.12    -0.01%    -1.41%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.5470    0.0190   +216bps     +3bps
   5-year   <CZ5YT=R    1.6400   -0.1090   +198bps    -10bps
   10-year  <CZ10YT=    1.7220   -0.0750   +155bps     -7bps
   2-year   <PL2YT=R    1.4360    0.0710   +205bps     +8bps
   5-year   <PL5YT=R    2.2780    0.0680   +261bps     +8bps
   10-year  <PL10YT=    2.7910    0.0430   +262bps     +4bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.08      2.08      2.08      2.01
 Hungary                  0.29      0.51      0.76      0.13
 Poland                   1.76      1.75      1.77      1.72
 Note: FRA  are for ask prices                              
 ($1 = 282.1400 forints)

 (Additional reporting by Robert Muller in Prague
Editing by Richard Balmforth)
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