* Government bonds retreat slightly after rally, equities up
* Yields drop at Hungarian, Czech T-bill auctions
* Romania bond auction results eyed
* Currencies move in tight ranges after recent gains
* Serbian central bank keeps rates on hold at 8.5 pct
(Adds government bonds, comments)
By Sandor Peto and Krisztina Than
BUDAPEST, Aug 19 (Reuters) - Central European bonds slipped
while stocks rose on Thursday, with currencies hovering in tight
ranges after recent gains as dealers looked to global markets
for direction and awaited the results of a Romanian bond sale.
Polish and Hungarian government bond yields rose by about 5
basis points, giving up some of the strong gains of the past few
days, which had pushed Hungarian yields down to 3-month lows as
of Wednesday.
A Reuters poll showed that the Hungarian central bank (NBH)
was expected to keep its base rate on hold at 5.25 percent on
Monday [], but traders said the international
market mood remained favourable for bonds in the region.
"The NBH will not say anything new, the question is how
foreign investors will behave," one trader said.
"The yield falls occurred mainly on buying by foreigners,
and partly because there will be a big (Hungarian) bond expiry
next week."
Yields dropped in Czech [] and Hungarian
[] short-term debt auctions on Thursday compared
with the previous auctions of the same paper.
Romania is due to tender 300 million lei of 5-year treasury
bonds later on Thursday. Analysts said Romania's finance
ministry would likely reject all bids if it sticks to its
self-imposed yield cap of 7 percent.
"I don't think they will give up on this tactic soon," one
trader said. "They can't really afford to keep going like that.
But if the central bank helps them and keeps (interbank) rates
low, they will continue to borrow short-term."
"Nobody will finance them (with maturities) over a year (at
7 percent), so I don't think they will sell anything today," the
trader added.
Czech bond yields have dropped to lifetime lows at the long
end, with investors bidding for more than twice the amount on
offer at a Czech 15-year bond auction on Wednesday as markets
anticipate less supply of longer maturities ahead.
The region's main stock indices were higher after
Wednesday's retreat, led by a 1 percent gain in Prague <>.
Traders said they expected the region's currencies to move
in tight ranges through the day.
The Polish zloty <EURPLN=> and the Romanian leu <EURRON=>
were flat against the euro at 1018 GMT, while the Czech crown
<EURCZK=> eased 0.1 percent and Hungary's forint <EURHUF=>
firmed 0.1 percent.
Serbia's dinar <EURRSD=> was also flat after the Serbian
central bank kept interest rates on hold at 8.5 percent, as
expected. []
Dealers said the region's currencies were likely to take
cues from global markets on Thursday and the euro/dollar cross.
"If the dollar strengthens against the euro, the zloty may go
to 3.96," analysts at Citibank Handlowy wrote in a note.
The zloty has strengthened recently supported by a strong
appetite of foreign investors for the country's debt.
Hungarian wages data, which showed that gross average wages
<HUWAGE=ECI> rose by an annual 0.5 percent in June after a
revised drop of 0.8 percent in May, did not cause any surprise
and did not have significant market impact. []
"I expect the forint to be roughly steady today, hovering
between 276.50 and 278 versus the euro," a dealer in Budapest
added.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.782 24.752 -0.12% +6.2%
Polish zloty <EURPLN=> 3.939 3.939 0% +4.19%
Hungarian forint <EURHUF=> 276.7 277.07 +0.13% -2.29%
Croatian kuna <EURHRK=> 7.293 7.27 -0.32% +0.22%
Romanian leu <EURRON=> 4.227 4.228 +0.02% +0.25%
Serbian dinar <EURRSD=> 104.53 104.52 -0.01% -8.28%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 94bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +110bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +106bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +401bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +379bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +323bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +555bps over bmk*
5-yr T-bond HU5YT=RR +3 basis points to +514bps over bmk*
10-yr T-bond HU10YT=RR +5 basis points to +432bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1218 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets:
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(Reporting by Krisztina Than/Sandor Peto, editing by Hugh
Lawson)
