* Polish bonds recoup sharp losses, yields highest in 1.5 yr
* Zloty steadies; markets see Polish cbank hiking in Jan
* Hungary bonds weaken after inflation data higher
(Updates with Polish bonds, Hungarian cbanker)
Jason Hovet and Marcin Goettig
PRAGUE/WARSAW, Jan 14 (Reuters) - Polish 10-year bond yields
briefly hit their highest levels in 18 months on Friday as
pension funds, facing a cut in transfers of employee
contributions, moved to the sidelines.
Central European currencies in contrast were little changed
but the Polish zloty and Hungarian forint were still underpinned
by rate rise expectations.
The 10-year benchmark bonds yields jumped 8 basis points to
6.40 percent during the session, having risen 40 basis points
since the end of 2010 following news of government plans to cut
transfers to pension funds by two-thirds to curb the budget
deficit and debt. []
"Pension funds are not supporting the long-end of the curve
any more," a Warsaw-based dealer said. "Apart from that,
successful auctions in the euro zone periphery are causing
capital to flow out of Poland."
Another dealer said he expected bond prices to hold steady
ahead of an interest rate decision due next Wednesday.
"The panic is behind us. The positions have been cleared and
prices are now at attractive levels," Pawel Bialczynski,
Warsaw-based fixed income dealer at BRE Bank, said.
Analysts expect Poland to start raising rates by 25 basis
points next week, a view that was kept intact on Thursday by a
rise in December inflation data. [] []
"After the rate hike there is a chance that prices will go
up, as the move is fully priced in," Bialczynski said.
Expectations of higher rates had propped up the zloty
<EURPLN=> in the past few days as a batch of monetary
policymakers, including central bank Governor Marek Belka,
called for a quick interest rate increase.
"Rate hike expectations are supporting the Polish currency,"
FX dealer based in Warsaw said.
By 1503 GMT however the zloty was a touch weaker to the
euro, trading at 3.87.
The Czech crown <EURCZK=> was 0.3 percent stronger, while
the Romanian leu <EURRON=> fell 0.1 percent but has been
unaffected by central bank Governor Mugur Isarescu's comments on
Thursday about possible rate cuts. []
HUNGARIAN BONDS DIP
Hungarian bond prices also fell on Friday because
forecast-beating inflation data fuelled rate rise expectations.
Hungary became the first country in central Europe to start
tightening policy in November and its base rate now stands at
5.75 percent after two quarter point hikes. It meets again on
Jan. 24.
Data on Friday showed Hungary's headline inflation rate
accelerated to 4.7 percent in December. Analysts said the data
would boost rate hike expectations but that risk appetite would
also play a factor in the bank's decision. []
"The jump (in headline CPI) to 4.7 percent will boost rate
hike expectations," said Gergely Suppan, analyst with
Takarekbank.
"The reasons that supported the rate increase in December
are still there. So it would be a surprise if the central bank
decided to hold interest rates this month."
Hungarian bond yields rose by up to 13 basis points on
long-dated paper.
However, Ferenc Karvalits, deputy governor of the Hungarian
central bank, said on Friday that the bank could slowly proceed
with monetary tightening, with pauses of one or two months
between interest rate rises possible. []
The Hungarian forint <EURHUF=> lost 0.3 percent to hover
above the 275 per euro resistance level, after gaining on
Thursday thanks to profit taking on the zloty/forint cross.
[]
"Dollar buying is driving the forint's weakening (against
the euro), the dollar has become cheap and some market players
are buying it," a Budapest FX dealer said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.362 24.422 +0.25% +2.62%
Polish zloty <EURPLN=> 3.87 3.871 -0.05% +2.19%
Hungarian forint <EURHUF= 275.67 274.85 -0.3% +0.84%
Croatian kuna <EURHRK=> 7.39 7.397 +0.03% -0.2%
Romanian leu <EURRON=> 4.263 4.26 -0.07% -0.7%
Serbian dinar <EURRSD=> 104.72 104.78 +0.06% +1.15%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -4 basis points to 60bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +88bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +95bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +386bps over bmk*
5-yr T-bond PL5YT=RR +7 basis points to +357bps over bmk*
10-yr T-bond PL10YT=RR +5 basis points to +334bps over bmk*
The P
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +618bps over bmk*
5-yr T-bond HU5YT=RR +13 basis points to +562bps over bmk*
10-yr T-bond HU10YT=RR +11 basis points to +478bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1603 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus, writing by Jason Hovet and
Marcin Goettig; Editing by John Stonestreet and Susan Fenton)
