* Czech bonds rally; 2019 bond yield hits new lifetime low
* Zloty, forint weaker on lower risk appetite
* Romania, Hungary debt auctions watched
By Marius Zaharia
BUCHAREST, Aug 12 (Reuters) - Czech bonds extended a rally
on Thursday spurred by the government's fiscal tightening plans,
while other central European assets struggled before debt
auctions in Hungary and Romania that will test risk appetite.
The Czech benchmark 2019 bond <CZ1002471=> yield touched a
new lifetime low and was quoted down 9 basis points at 3.451
percent. The bond's yield spread over a comparable German Bund
has tightened around 35 basis points since July to around 111
basis points.
Standard & Poor's revised Czech Republic's rating outlook to
positive from stable on Tuesday on improved fiscal prospects. On
Wednesday, the government approved a 2011 budget framework that
would cut the fiscal gap to 4.6 percent of GDP, from this year's
5.3 percent. []
"The rally on bond market is possibly not yet over, though
beware of approaching supply as the room for more ASW tightening
is diminishing quickly," Komercni Banka dealers said in a note.
Worries over a slowing recovery in the U.S. were still
hanging on the market and at 0740 GMT, the Polish zloty
<EURPLN=> and the Hungarian forint <EURHUF=> were 0.2 percent
weaker, while the Czech crown <EURCZK=> was flat.
Romania's leu <EURRON=> remained decoupled from its regional
peers due to the risk of central bank interventions and traded
0.2 percent up on the day mainly on local commercial flows.
Debt auctions later in the day in Hungary and Romania will
be an important test of sentiment towards central Europe. Both
countries sold more than planned at their previous tenders due
to solid local demand.
But Romania is seen having problems selling paper carrying
maturities over one year due to the finance ministry's tactic of
rejecting yields above 7 percent, while markets demand for more
due to uncertainty over implementation of recent austerity
measures.
"It is hard to see a reason why (an investor) would accept
an yield of 20-30 basis points lower than what you would get on
the secondary market," one trader in Bucharest said. "Weaker ...
(risk appetite) is not helping either."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.77 24.78 +0.04% +6.25%
Polish zloty <EURPLN=> 4.003 3.994 -0.22% +2.52%
Hungarian forint <EURHUF=> 281.6 281.1 -0.18% -4%
Croatian kuna <EURHRK=> 7.229 7.214 -0.21% +1.11%
Romanian leu <EURRON=> 4.229 4.239 +0.24% +0.2%
Serbian dinar <EURRSD=> 104.91 104.74 -0.16% -8.61%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 120bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +114bps over bmk*
10-yr T-bond CZ9YT=RR -14 basis points to +109bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 0840 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Marius Zaharia; Editing by Ruth Pitchford)
