* Hungarian bonds oversubscribed, 3-yr yield at 31-mth low
* Currencies ease slightly, stocks rise
(Recasts with Hungary bond tender, updates prices)
By Sandor Peto
BUDAPEST, Feb 25 (Reuters) - Hungarian government bonds
attracted strong demand on Thursday, with yields dropping, even
though Central European currencies eased slightly as concerns
lingered over how Europe will solve Greece's financial problems.
Hungary sold 50 billion forints ($253.6 million) worth of
bonds at auction <HUISSUE>, with three-year bonds sold at 6.69
percent, the lowest average auction yield since July 2007.
Traders said interest in medium-term and long-term Hungarian
bonds increased as the central bank signalled early this week
that the end of its interest rate cuts may be approaching.
Rate cuts, totalling 375 basis points since July 2009 to a
record low of 5.75 percent, have pushed down short-term yields,
and investors who believe the yield curve has become too steep
are buying longer-dated bonds now, traders said.
"The supply is relatively low and the yield falls can go on,
but this is more of a technical rather than fundamental rally,"
one Budapest-based trader said.
Czech 10-year bonds were quoted at 4.173/070 percent, a
seven-week low, down by four basis points from Wednesday.
Czech bonds have been helped by a strong auction on
Wednesday, and dealers said a recent drop in yields of
longer-dated bonds was unlikely to reverse for now.
"Recent tightening at the long end, though, is unlikely to
be reversed for now, even prior to next week's 10-year bond
sale. The main part of this year's issuance is still to come
later in the year, though, and we see the pressure on bonds
coming back as the natural demand dries out during the year," a
Komercni Banka trader said.
CURRENCIES RESILIENT
Polish bonds were stable after the central bank left
interest rates unchanged on Wednesday and retained its neutral
bias.
"Yesterday's decision and the statement were both in line
with expectations," said Remigiusz Zalewski, a dealer at BRE
bank in Warsaw. "But the market expected the council to change
its bias to a more restrictive one, so prices were up a bit as
the bias remained the same."
Bond markets are also getting support from regional
currencies' resilience to the euro's weakness against the
dollar, while reaction to financial problems in the euro zone
periphery, mainly Greece, has been mostly muted.
Regional stock markets were mostly in the black, with Warsaw
<> rising half a percent, Budapest <> edging 0.4
percent higher, Bucharest <> gaining 0.2 percent, while
Prague <> moved sideways.
Currencies across the region retreated slightly, with the
crown <EURCZK=> and the zloty <EURPLN=> both shedding about 0.3
percent by 1100 GMT, extending their morning losses, while the
forint <EURHUF=> dropped 0.1 percent versus the euro.
Dealers and analysts said global risk appetite would remain
key for the region's assets, but market reaction to Greek
developments have become muted as budgets in the region were in
a better shape than in countries in the euro zone's periphery.
"It seems the whole region is beginning to divert from the
Greek trouble, because reactions to the bad news coming from
there are ever smaller," a Prague dealer said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.903 25.819 -0.32% +1.6%
Polish zloty <EURPLN=> 3.99 3.977 -0.33% +2.86%
Hungarian forint <EURHUF=> 269.84 269.48 -0.13% +0.19%
Croatian kuna <EURHRK=> 7.269 7.269 0% +0.55%
Romanian leu <EURRON=> 4.118 4.117 -0.02% +2.9%
Serbian dinar <EURRSD=> 99.71 99.44 -0.27% -3.84%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR 0 basis points to 90bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +131bps over bmk*
10-yr T-bond CZ10YT=RR +2 basis points to +110bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +401bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +332bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +291bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +533bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +484bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +435bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1200 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Sandor Peto; Editing by Toby Chopra/Susan
Fenton)
