CEE MARKETS-Polish bond yield sets 4-year low, currencies rise despite firm dollar

Credit: REUTERS/Peter Andrews

Poland's 10-year government bond yield sank to its lowest level in more than four years on Friday after an attack on two oil tankers in the Gulf, which the United States blamed on Iran, led to global buying of less risky assets.

By Sandor Peto and Alicja Ptak

BUDAPEST/WARSAW, June 14 (Reuters) - Poland's 10-year government bond yield sank to its lowest level in more than four years on Friday after an attack on two oil tankers in the Gulf, which the United States blamed on Iran, led to global buying of less risky assets.

Tehran denied the allegation following the attacks on Thursday, but concerns grew about a new U.S.-Iranian confrontation.

The Polish paper PL111498=PW traded at 2.3895% at 0843 GMT, down 3 basis points from Thursday's close.

"(There is a) big drop in yields worldwide, (and) the rising presence of foreign investors dragged (Polish) yields down," said Michal Zak, dealer at mBank.

"Yesterday's (Polish government bond) auction apparently has not covered all positions, if only a day after we see a 10 basis point drop," he added, referring to the fall in yield from Thursday's peak.

Other Central European bond yields also dropped, and currencies mainly firmed slightly, despite a rebound in U.S. yields and the dollar .DXY against major currencies, partly after better-then-expected U.S. retail sales data.

In recent weeks, dollar sales have helped the region's main currencies to firm, and on Friday the zloty EURPLN= touched a 10-month high against the euro at 4.2525, and the Czech crown EURCZK= a 9-month high at 25.523.

"The reverse correlation with the dollar does not work 100 percent. There is hardly any trade in local markets right now, this is a sleepy Friday," one Budapest-based dealer said.

"After the retail figures... the first U.S. rate cut may come later, but the expectation is still for cuts."

Despite a rise in U.S. Treasury bond yields, German yields remained lower, though the 10-year yield was off record lows touched earlier in the session.

Although a surge in wages in the region is pushing consumer prices higher, Poland has the lowest annual inflation among Central Europe's main economies - revised up to 2.4 percent for May on Friday.

Polish rate setter Jerzy Osiatynski said the central bank may need to start to increase its record low interest rates next year, but that in 2019 borrowing costs would not change.

Hungary's 10-year yield was fixed lower by 5 basis points from Thursday's fixing HUBONDFIX at 2.74%.

The forint EURHUF= firmed 0.1 percentto 321.8 versus the euro.

CEE MARKETS

SNAPSHOT

AT 1517 CET

CURRENCIES

Latest

Previous

Daily

Change

bid

close

change

in 2019

Czech crown

EURCZK=

25.5250

25.5600

+0.14%

+0.71%

Hungary forint

EURHUF=

321.8000

322.1400

+0.11%

-0.22%

Polish zloty

EURPLN=

4.2559

4.2564

+0.01%

+0.79%

Romanian leu

EURRON=

4.7225

4.7215

-0.02%

-1.45%

Croatian kuna

EURHRK=

7.4120

7.4130

+0.01%

-0.03%

Serbian dinar

EURRSD=

117.9200

118.0000

+0.07%

+0.32%

Note: daily change

calculated from

1800 CET

Latest

Previous

Daily

Change

close

change

in 2019

Prague

.PX

1049.66

1050.8800

-0.12%

+6.40%

Budapest

.BUX

40636.65

40469.80

+0.41%

+3.83%

Warsaw

.WIG20

2289.25

2300.20

-0.48%

+0.55%

Bucharest

.BETI

8516.02

8477.19

+0.46%

+15.34%

Ljubljana

.SBITOP

871.72

870.12

+0.18%

+8.39%

Zagreb

.CRBEX

1897.72

1901.30

-0.19%

+8.51%

Belgrade

.BELEX15

724.20

729.35

-0.71%

-4.92%

Sofia

.SOFIX

579.80

578.71

+0.19%

-2.47%

BONDS

Yield

Yield

Spread

Daily

(bid)

change

vs Bund

change in

Czech Republic

spread

2-year

CZ2YT=RR

1.6150

0.0280

+230bps

+5bps

5-year

CZ5YT=RR

1.5410

0.0390

+214bps

+4bps

10-year

CZ10YT=RR

1.5840

-0.0140

+183bps

-1bps

Poland

2-year

PL2YT=RR

1.5760

-0.0200

+226bps

+1bps

5-year

PL5YT=RR

1.9660

-0.0200

+257bps

-2bps

10-year

PL10YT=RR

2.4070

-0.0450

+265bps

-4bps

FORWARD

RATE

AGREEMENT

3x6

6x9

9x12

3M interbank

Czech Rep

CZKFRAPRIBOR=

2.17

2.06

1.95

2.17

Hungary

HUFFRABUBOR=

0.29

0.41

0.51

0.18

Poland

PLNFRAWIBOR=

1.74

1.73

1.71

1.72

Note: FRA quotes

are for ask prices

**************************************************************

(Additional reporting by Jason Hovet in Prague; Editing by Kirsten Donovan and Gareth Jones)

((sandor.peto@thomsonreuters.com)(+36 1 327 4744)(Reuters Messaging: sandor.peto.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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