* Hungarian 10-yr bonds at 28-month lows
* Czech c.bank holds rates as expected
* Leu down from Wednesday's 14-month highs
(Adds Hungarian bond moves, Czech rate decision)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, March 25 (Reuters) - Hungarian ten-year
bond yields fell to their lowest in 28 months due to reduced
supply on Thursday, while the Czech crown was little changed
after the central bank kept interest rates on hold.
Bonds sold in Hungary's bi-weekly auctions usually include
10-year paper, but on Thursday only three- and five-year bonds
were auctioned and the government sold more than planned.
[] []
Ten-year bond yields fell five basis points to 28-month lows
at 6.9 percent in the secondary market.
"There was some buying after the auctions," one
Budapest-based trader said. "Yield falls are likely to
continue."
Earlier this month short-dated yields fell to their lowest
in near five years. Long paper joined the rally later as primary
supply is low, local banks are flush with liquidity and 336
billion forints worth of 2010/C bonds will expire on April 12.
In Czech Republic, the central bank kept rates at a record
low of 1 percent on Thursday, as expected []. The
bank is seen hiking rates later this year, but sluggish domestic
demand and inflation below target may delay tightening.
"While we have argued for some time that the pace of
monetary tightening priced into markets was too aggressive, it
now seems that interest rates could rise at a slower pace than
even we had anticipated," Capital Economics said in a note.
"We do not expect interest rates to be raised until
the middle of next year."
By 1317 GMT the crown <EURCZK=>, Poland's zloty <EURPLN=>
and Hungary's forint <EURHUF=> each shed some 0.1 percent.
STRONG LEU
Romania's leu <EURRON=> retreated from Wednesday's 14-month
highs in thin trade, losing some 0.3 percent against the euro.
Market players attributed its recent strengthening to a
share capital increase by a local unit of an Austrian bank and
pre-Easter remittances sent from Romanian workers living abroad.
Dealers said they expected Romania's central bank to
intervene to weaken the unit if the leu firming continues to
gather pace. The central bank is suspected to have entered the
market in the past, but does not comment on when it does.
Romania is expected to cut rates by 50 basis points to a
record low of 6.5 percent on Monday, taking advantage of a
strengthening leu. [] Hungary is seen easing by 25
basis points to 5.5 percent in the same day. []
All analysts polled by Reuters saw rates unchanged at 3.5
percent in Poland on March 31. [] The median
forecast of analysts still puts the central bank's key rate at 4
percent at the end of 2010 but conviction seems to be waning
over the two small hikes that implies.
European Union members gather later on Thursday for a
two-day summit and markets were waiting to see whether the
bloc's leaders will reach a last-minute agreement on how to help
heavily-indebted Greece.
Efforts to arrange a special meeting of the 16 euro
countries had failed by late Wednesday, with France and Germany
discussing what role the International Monetary Fund might play
in any Greek rescue and what form extra contributions by euro
zone states could take. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.353 25.341 -0.05% +3.81%
Polish zloty <EURPLN=> 3.887 3.884 -0.08% +5.58%
Hungarian forint <EURHUF=> 263.69 263.43 -0.1% +2.53%
Croatian kuna <EURHRK=> 7.259 7.261 +0.03% +0.69%
Romanian leu <EURRON=> 4.06 4.047 -0.32% +4.37%
Serbian dinar <EURRSD=> 99.71 99.747 +0.04% -3.84%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +4 basis points to 85bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +107bps over bmk*
10-yr T-bond CZ10YT=RR -2 basis points to +97bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +377bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +302bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +239bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -5 basis points to +464bps over bmk*
5-yr T-bond HU5YT=RR -4 basis points to +409bps over bmk*
10-yr T-bond HU10YT=RR -7 basis points to +379bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1417 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara
Leszkowicz/Marius Zaharia; Editing by Toby Chopra)
