* Romania debt tender struggles; Hungary goes smooth
* Czech bonds rally; 2019 bond yield hits lifetime low
* FX mixed as stocks firm
(Updates throughout)
By Marius Zaharia and Jason Hovet
BUCHAREST/PRAGUE, Aug 12 (Reuters) - Romania sold a fraction
of 1-year paper on offer on Thursday, holding to a self-imposed
yield cap and failing to get a boost from a rally in central
European debt markets that sent Czech yields to new lows.
Falling yields on safer bonds in Europe has given a lift to
central European debt markets, and top among the region has been
Czech bonds that are backed by strong fiscal tightening plans
from a new centre-right administration.
Hungary, too, was able to easily sell out its regular bond
tenders on Thursday, adding to a string of firm sales since it
rattled markets last month by ending aid talks with the IMF.
Central Europe has a lower debt burden than parts of the
euro zone, making its bond markets often more attractive.
However the region gets lower inflows than emerging markets like
South Africa, Turkey or Brazil due to weaker growth prospects.
But Romania has had trouble selling debt with more than a
1-year maturity due to its tactic of rejecting yields above 7
percent, while markets demand more to compensate for uncertainty
over implementation of recent austerity measures.
Analysts say it is a matter of time before funding needs
pile up and the ministry will be forced to scrap its
stubbornness. This could happen as early as October as IMF/EU aid
disbursement could tide it over through September.
"Things are not looking good but they will probably not pay
more than 7 percent until they have no choice ... probably in
the fourth quarter," said Nicolaie Alexandru-Chidesciuc, ING
Bank Romania chief economist.
SAFE HAVEN
Worry over a slowing U.S. economic recovery has lifted
bonds, but kept currencies under pressure again on Thursday.
The Polish zloty <EURPLN=> dipped 0.1 percent and hovered
around the psychological 4.0 per euro level by 1532 GMT.
The Czech crown inched up 0.1 percent but was off 21-month
peaks hit last week. Romania's leu <EURRON=> edged up 0.3
percent against the euro in thin trade, Hungary's forint
<EURHUF=> was up 0.2 percent.
Czech government bonds rallied more after an
austerity-minded government won a confirmation vote in
parliament on Tuesday and ratings agency Standard & Poor's
raised the Czech outlook to positive.
The benchmark 2019 bond <CZ1002471=> yield touched a new
lifetime low on Thursday, and was quoted down 12 basis points at
3.413 percent by late afternoon, narrowing the spread with a
comparable German bond by a similar amount.
Prague dealers said the rally could go a bit further and
that the better market conditions now may mean the realisation
of an already-delayed eurobond issue in the next month as the
Czechs aim to meet record high borrowing this year.
"It is a good time for a eurobond or for the ministry to
issue more," a fixed income dealer in Prague said. "Bonds are at
a peak right now."
Hungary sold 54 billion forints worth of bonds at regular
auctions on Thursday, more than planned. Yields dropped by up to
31 basis points. <HUAUCTION02>
The country has been under close scrutiny from foreign
investors since it suspended an aid deal led by the
International Monetary Fund, but solid local demand has
bolstered recent debt auctions.
"There is still the wall of money entering EM funds which
has to be deployed to Hungary regardless of fund managers' views
given that they do not want to be too far off benchmark," said
Peter Attard Montalto of Nomura in London.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.763 24.78 +0.07% +6.28%
Polish zloty <EURPLN=> 4.00 3.994 -0.15% +2.6%
Hungarian forint <EURHUF=> 280.55 281.1 +0.2% -3.64%
Croatian kuna <EURHRK=> 7.23 7.214 -0.22% +1.1%
Romanian leu <EURRON=> 4.228 4.239 +0.26% +0.22%
Serbian dinar <EURRSD=> 104.923 104.74 -0.17% -8.62%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +5 basis points to 124bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +113bps over bmk*
10-yr T-bond CZ9YT=RR -13 basis points to +109bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +414bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +396bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +337bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +600bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +552bps over bmk*
10-yr T-bond HU10YT=RR -7 basis points to +473bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1733 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Marius Zaharia; Editing by Andrew Heavens)
