* Hungary bond yields plummet as market prices rate cuts
* Polish yields edge up after Weds rally on debt comments
* Crown, zloty gain on steady risk appetite, others flat
By Marton Dunai and Dagmara Leszkowicz
WARSAW/BUDAPEST, Sept 17 (Reuters) - Hungarian 1-year T-bond
yields fell below 7 percent on Thursday for the first time since
June 2006 as investors priced in a steady streak of central bank
rate cuts in coming months, aimed at helping the economy.
A 12-month Treasury bill auction saw the average yield on
the paper falling to 6.99 percent amid heavy bidding on Thursday
and yields also fell on the secondary market, extending a rally
of the past few days [].
Meanwhile, the Czech Finance Ministry said it would issue
euro denominated bonds at an auction scheduled for Sept. 30,
opening up another financing channel at a time of increased
political uncertainty and continuing budget woes.
[]
The Czech crown <EURCZK=> was up 0.4 percent on the day at
1411 GMT after hitting its 9-month highs at 24.977 to the euro
in morning trading. The Polish zloty <EURPLN=> also added 0.4
percent, and the forint <EURHUF=> was flat but remained near
recent highs as a positive global mood provided support.
Forward agreements in Hungary now price in cumulative cuts
of some 300 basis points in the central bank's key 8 percent
base rate by February <NBHI>.
"A cut of 75 basis points (in the base rate) is easily
priced in for the next meeting (on Sept. 28)," a Budapest-based
fixed income trader said.
The government debt management agency AKK upped the offer
for next week's bond auction to 47 billion forints on Thursday
from 42 billion offered at the auction last week. <HUISSUE>
Polish bond yields were a touch higher on Thursday,
adjusting after falling on Wednesday on news that Poland eyed
foreign debt markets and considered scrapping long-term zloty
bond issues until the end of 2009. []
"This is a clear signal for buying (the debt)," said Henryk
Sulek, a dealer at Millennium Bank in Warsaw. "If there's no
(local) supply, the market has to take what is out there."
CZECH NEWS SEEN GOOD FOR BUDGET
Czech politics remained in the focus of attention and
analysts said a potential postponement of early elections in the
Czech Republic from Nov. until June 2010 could bode well for the
budget at a time when Prague deals with an expanding deficit.
Dealers said markets welcomed that the present caretaker
government will likely stay in power until mid 2010.
"There is nothing to weaken emerging European assets much," a
dealer in Budapest said. "Weakening (in the forint) will be
capped at 273.50 (vs the euro). The forint also faces resistance
at 269, though."
Poland's industrial output shrank 0.2 percent on the year
versus an expected growth of 0.4 percent, but the Monetary
Policy Council should leave rates unchanged, analysts said,
adding that market reaction should be muted. []
"Output is bottoming out," said Rafal Benecki, an analyst at
ING Bank. "...The improvement trend should continue in coming
months."
"The holiday is over, liquidity is back and London is
definitely bullish on the zloty," said Tomasz Niemiec, dealer at
Millennium bank.
In Romania the consolidated budget deficit rose to 4.4
percent of gross domestic product in the first eight months of
the year. [] It should affect the leu negatively, a
dealer in Bucharest said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.055 25.159 +0.42% +6.78%
Polish zloty <EURPLN=> 4.111 4.129 +0.44% +0.1%
Hungarian forint <EURHUF=> 270.54 270.48 -0.02% -2.58%
Croatian kuna <EURHRK=> 7.288 7.285 -0.04% +1.06%
Romanian leu <EURRON=> 4.258 4.262 +0.09% -5.72%
Serbian dinar <EURRSD=> 93.351 93.37 +0.02% -4.15%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR 0 basis points to +198bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +171bps over bmk*
10-yr T-bond CZ10YT=RR +13 basis points to +187bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +373bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +333bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +276bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -5 basis points to +592bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +522bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +436bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1611 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaux, writing by Dagmara Leszkowicz
and Marton Dunai; Editing by Andy Bruce)
