* Hungarian assets rebound as HUF off record lows vs Swissie
* PMI indices in region mostly strong on German recovery
* Czech, Polish bond yields fall at auctions
* Volatility may stay high in fragile global mood
(Adds government bonds, fresh prices and comments)
By Gergely Szakacs and Sandor Peto
BUDAPEST, Sept 1 (Reuters) - Hungarian government bonds
recovered on Wednesday as the forint rebounded from record lows
against the Swiss franc as strong manufacturing data and
improved global sentiment helped currencies in the region.
Czech and Polish bond yields dropped at fresh auctions.
However, Central European assets remain highly exposed to a
rise in volatility in international markets in the past two
weeks, particularly Hungarian markets, traders said.
Hungarian government bond yields dropped 25 basis points
across the curve compared to late Tuesday's levels.
Bond prices regained most of the ground lost on Tuesday when
a fall in the forint <CHFHUF=> to record lows against the Swiss
franc triggered concern over the exposure of Hungarian
households to franc-denominated debt. []
By 1044 GMT, the forint had firmed more than 1 percent
against the franc to about 220.50, and 5-year government bond
yields dropped 23 basis points to 7.22 percent, rebounding from
6-week highs reached on Tuesday.
The rebound started late on Tuesday when the cost of
insuring Hungarian debt for 5 years via credit default swaps
closed at 365 basis points according to CMA data, down from 375
earlier in the day. The cost fell further on Wednesday to 357
basis points.
"Most of the 25 basis point fall (in bond yields) was short
covering," one Budapest-based fixed income trader said. "I don't
think that (the market jitters) are over, volatility in all
markets (worldwide) has increased."
"Hungary's markets have underperformed," the trader said.
The forint <EURHUF=> firmed 0.3 percent against the euro by
1059 GMT to 286.1, Poland's zloty <EURPLN=> gained 0.2 percent
to 3.985, the Czech crown <EURCZK=> 0.1 percent to 24.71, while
the Romanian leu <EURRON=> was flat at 4.264.
PMI UP, AUCTION YIELDS DROP
Purchasing manager indices (PMI) rose in August in Poland
and the Czech Republic as a surge in orders boosted
manufacturing, helped by Germany's economic recovery, a key
market of the region. []
Polish central bank rate setter Elzbieta Chojna-Duch said
there was no need to hurry with monetary tightening
[], but dealers said the comments did not dispel
expectations for an interest rate hike by early next year.
Poland sold 4 billion zlotys worth of 2-year bonds at a
tender which attracted moderate demand, with the average yield
dropping to 4.672 percent from 4.759 percent a month ago.
[]
At a 5-year bond auction in the Czech Republic, investors
bid for more than twice the offer, and the yield dropped to a
record low at 2.592 percent. []
Romanian government bond yields, however, rose 10 basis
points to 7.3-7.6 percent after the finance ministry signalled
on Tuesday that it would stick to a self-imposed 7 percent cap
on yields at debt tenders. []
Romanian consumption dropped by 0.7 percent year-on-year in
the second quarter after a 4 percent fall in the first quarter
as the economy remained sluggish after a 7 percent contraction
in 2009. []
Hungary's domestic consumption has been also weak according
to recent figures and its PMI, compiled under a different
methodology then Czech and Polish figures, fell to 51.9 in
August from 53.5 in July.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.71 24.729 +0.08% +6.51%
Polish zloty <EURPLN=> 3.985 3.992 +0.18% +2.99%
Hungarian forint <EURHUF=> 286.1 286.9 +0.28% -5.51%
Croatian kuna <EURHRK=> 7.272 7.273 +0.01% +0.51%
Romanian leu <EURRON=> 4.264 4.264 0% -0.62%
Serbian dinar <EURRSD=> 105.36 105.077 -0.27% -9%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -3 basis points to 104bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +116bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +102bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +406bps over bmk*
5-yr T-bond PL5YT=RR -6 basis points to +392bps over bmk*
10-yr T-bond PL10YT=RR -8 basis points to +326bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -27 basis points to +638bps over bmk*
5-yr T-bond HU5YT=RR -29 basis points to +598bps over bmk*
10-yr T-bond HU10YT=RR -32 basis points to +518bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1259 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Gergely
Szakacs/Sandor Peto, editing by Hugh Lawson)
