* Hungarian 10-yr bonds at 28-month lows
* Czech c.bank holds rates, but 4-2 vote surprises
* Leu down from Wednesday's 14-month highs
(Adds Czech cbank gov comments)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, March 25 (Reuters) - Hungarian ten-year
bond yields fell to their lowest in 28 months on Thursday due to
a cut in supply, 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 trader in
Budapest said. "Yield falls are likely to continue."
Hungary, long one of central and eastern Europe's poorest
performing economies, has recovered some poise since being
bailed out by the IMF in late 2008 and dealers say it also looks
like a better bet compared to Greece and other weaker euro zone
members.
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 the Czech Republic, the central bank kept rates at a
record low of 1 percent, as expected []. The bank
is seen hiking rates later this year, but sluggish domestic
demand and inflation that is below target may delay tightening.
In fact, two central bankers voted for a 25 basis point cut
in interest rates on Thursday and Czech central bank governor
Zdenek Tuma said that it would be possible to imagine the next
move could be a cut [].
"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."
The crown <EURCZK=> did not react to the comments and by
1500 GMT it traded 0.1 percent up. But the short-end of the IRS
curve was down by about 6 basis points.
"We had expected some dovish comments but Tuma's mention of
a possible rate cut and the 4-2 vote sparked a small market
reaction," a fixed income dealer said.
Poland's zloty <EURPLN=> was 0.1 percent up and Hungary's
forint <EURHUF=> shed some 0.3 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.
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 on the same day. []
All analysts polled by Reuters saw rates unchanged at 3.5
percent in Poland at a meeting next Wednesday. []
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.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.312 25.341 +0.11% +3.97%
Polish zloty <EURPLN=> 3.882 3.884 +0.05% +5.72%
Hungarian forint <EURHUF=> 264.15 263.43 -0.27% +2.35%
Croatian kuna <EURHRK=> 7.259 7.261 +0.03% +0.69%
Romanian leu <EURRON=> 4.059 4.047 -0.3% +4.4%
Serbian dinar <EURRSD=> 99.63 99.747 +0.12% -3.76%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +3 basis points to 84bps 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 +5 basis points to +384bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +305bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +240bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -6 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 1700 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 Patrick Graham)
