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Europe, Forex

Czech yields mixed before euro-denominated bond sale, FX down

PRAGUE, July 17 (Reuters) – Czech yields were mixed on Wednesday before the sale by auction of a new tranche of a euro-denominated government bond that has drawn strong investor demand this year, while a firming U.S. dollar put the brakes on central Europe’s currencies. Rather than going to international markets, the Czech Finance Ministry has this year begun selling euro-denominated bonds in the domestic market to help cover its euro exposure for bond redemptions. All three auctions so far have drawn demand of at least double the sold amount and a similar result could come from Wednesday’s auction of up to 165 million euros of a fourth tranche. “The negative yield is not as negative compared with the euro zone,” Komercni Banka analyst Frantisek Taborsky said, adding the relatively small amounts being offered had also helped push up investor demand. In Poland, bond yields slipped following pay data that showed corporate wages grew 5.3% in June, less than expected. Currency markets were ruled by a firmer dollar following better-than-expected retail sales data in the United States, with reduced demand for emerging market assets. Hungary’s forint led losses, hitting its lowest against the euro since the end of May. By 0901 GMT, it was bid down 0.2% at 326.69 per euro. Equilor brokerage said the forint would find its next support at 327.50. In Poland, the zloty fell 0.1% to 4.264 per euro and the Czech crown was steady at 25.605. Currencies have slipped into tight ranges this month as markets wait to see if the U.S. Federal Reserve will start to loosen policy this month. The European Central Bank may soon unveil plans for new monetary stimulus while central Europe’s policymakers have dropped into a holding pattern with interest rates. CEE MARKETS SNAPSHOT AT 1102 CET CURRENCIES Latest Previous Daily Change bid close change in 2019 EURCZK= Czech crown 25.6050 25.5925 -0.05% +0.40% EURHUF= Hungary forint 326.6900 326.0750 -0.19% -1.72% EURPLN= Polish zloty 4.2637 4.2591 -0.11% +0.61% EURRON= Romanian leu 4.7350 4.7313 -0.08% -1.71% EURHRK= Croatian kuna 7.3890 7.3903 +0.02% +0.28% EURRSD= Serbian dinar 117.6000 117.6900 +0.08% +0.60% Note: daily change calculated from 1800 CET Latest Previous Daily Change close change in 2019 .PX Prague 1062.48 1057.7300 +0.45% +7.70% .BUX Budapest 40992.66 40878.78 +0.28% +4.74% .WIG20 Warsaw 2316.36 2321.52 -0.22% +1.75% .BETI Bucharest 9134.42 9126.50 +0.09% +23.71% .SBITOP Ljubljana 869.29 868.94 +0.04% +8.09% .CRBEX Zagreb 1895.38 1901.20 -0.31% +8.38% .BELEX15 Belgrade 749.86 757.57 -1.02% -1.55% .SOFIX Sofia 577.45 578.55 -0.19% -2.86% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech Republic spread CZ2YT=RR 2-year 1.4420 -0.0120 +218bps -1bps CZ5YT=RR 5-year 1.3600 0.0090 +201bps +2bps CZ10YT=RR 10-year 1.4740 0.0000 +175bps +3bps Poland PL2YT=RR 2-year 1.5520 -0.1620 +229bps -16bps PL5YT=RR 5-year 1.9290 -0.0480 +257bps -3bps PL10YT=RR 10-year 2.2660 -0.0170 +254bps +1bps FORWARD RATE AGREEMENT 3×6 6×9 9×12 3M interbank Czech Rep 2.16 2.08 2.00 2.16 Hungary 0.30 0.38 0.46 0.26 Poland 1.73 1.72 1.71 1.72 Note: FRA quotes are for ask prices ************************************************************** (Reporting by Jason Hovet in Prague, Krisztina Than in Budapest and Alan Charlish in Warsaw; Editing by Catherine Evans)

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