Politics

Hungarian bond yields hit multi-month lows ahead of auction

Reuters

By Sandor Peto

BUDAPEST, Jan 3 () - Hungarian government bonds extended their price gains, with yields dropping to new multi-month lows amid optimism that demand will be robust at the year's first auction on Thursday.

The country's 10-year papers traded at yields around 2.815 percent ahead of the auctions, their lowest level since May 2018.

Yields dropped even though the 70 billion forint ($246.77 million) offer at the primary sale was 15 billion higher than at the last auction held four weeks ago.

The business news site portfolio.hu reported late on Wednesday that the government had received a huge amount of European Union fund inflows in December. The Finance Ministry did not immediately comment on the report.

"I expect a strong auction," one Budapest-based fixed income trader said.

"The fall in yield follows a plunge in interest rate swaps (IRSs) after the central bank's latest swap tender (in December), the trader added.

"There is a very wide spread between IRSs and bond yields, which will inevitably narrow, but until then it may trigger package sales by some big accounts."

Poland's 10-year bond yield fell similar to its Hungarian peer, by around 10 basis points already on Wednesday, helped by disappointing PMI manufacturing index figures from Poland and the Czech Republic and a decline in Bund yields.

Poland's 10-year yield moved a tad lower again on Thursday to 2.746 percent on Thursday, while Bund yields changed little, and yields in the southern part of the euro zone -- often tracked by Central Europe -- rose.

Increased risk aversion in international markets after Wednesday's weak Chinese manufacturing data and a revenue warning from Apple was reflected by a weakening of Central European currencies and some of its stock indices.

Warsaw led the decline in both asset classes, with its blue-chip stock index dropping 1.2 percent by 0949 GMT, still staying above its 90-day moving average, and the zloty shedding a quarter of a percent to 4.3027 per euro.

Bucharest stocks bucked the Asian and European trend and rose 1.5 percent in their first session in 2019.

The index has still regained only about a third of its losses suffered in a plunge in December after the government announced new taxes that hurt the earnings of companies in several sectors, including banks.

The leu eased 0.2 percent to 4.665 versus the euro.

The Romanian central bank may announce at its news conference after its January 8 meeting that it would tolerate a weaker leu than so far, ING analysts said in a note.

CEE MARKETS SNAPSHOT AT 1049 CET
CURRENCIES
Latest Previous Daily Change
bid close change in 2019
Czech crown 25.7400 25.7760 +0.14% -0.13%
Hungary forint 322.4300 322.2500 -0.06% -0.42%
Polish zloty 4.3027 4.2925 -0.24% -0.30%
Romanian leu 4.6650 4.6576 -0.16% -0.24%
Croatian kuna 7.4270 7.4200 -0.09% -0.23%
Serbian dinar 118.3000 118.4000 +0.08% +0.00%
Note: daily change calculated from 1800 CET
Latest Previous Daily Change
close change in 2019
Prague 990.93 989.3700 +0.16% +0.44%
Budapest 39614.13 39734.06 -0.30% +1.21%
Warsaw 2273.68 2301.62 -1.21% -0.13%
Bucharest 7497.23 7383.68 +1.54% +1.54%
Ljubljana 796.66 804.26 -0.94% -0.94%
Zagreb 1726.37 1729.39 -0.17% -1.28%
Belgrade 729.88 761.69 -4.18% -4.18%
Sofia 585.37 586.12 -0.13% -1.53%
BONDS
Yield Yield Spread Daily
(bid) change vs Bund change in
Czech Republic spread
2-year 1.5360 0.0070 +215bps +1bps
5-year 1.6400 -0.1090 +197bps -11bps
10-year 1.7360 -0.0610 +156bps -7bps
Poland
2-year 1.3900 0.0250 +200bps +3bps
5-year 2.1970 -0.0130 +253bps -1bps
10-year 2.7650 0.0170 +259bps +1bps
FORWARD RATE AGREEMENT
3x6 6x9 9x12 3M interbank
Czech Rep 2.08 2.09 2.08 2.01
Hungary 0.29 0.52 0.76 0.13
Poland 1.74 1.75 1.75 1.72
Note: FRA quotes are for ask prices
**************************************************************

($1 = 283.6700 forints)


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

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More