EMERGING MARKETS-Latam currencies gain as U.S. data hits dollar, virus fears hurt stocks

 (Updates prices)
    * Dollar slumps after weak U.S. business activity data
    * Brazil's real comes off all-time low
    * Vale posts surprise loss, slams Sao Paulo stocks 
    * Brazil, Argentina to remain shut until Wednesday

    By Susan Mathew
    Feb 21 (Reuters) - Most Latin American currencies firmed on
Friday, reversing course from earlier in the session as the
dollar took a hit from data that showed business activity in the
United States stalled in February.
    Brazil's real came off all-time lows to rise for the
first time in five sessions, up 0.2%. Over the week, the
currency lost around 2% in its seventh weekly loss in eight.  
    Crude exporter Colombia's peso rallied 0.7%, despite
falling oil prices, while higher copper prices helped the
Chilean peso recover from a 1.4% slide in the previous
    Mexico's peso traded 0.1% lower but was well off the
day's lows, when it hit a two-month trough against the
    The dollar slumped after a survey of purchasing
managers showed U.S. business activity in the manufacturing and
services sectors stalled in February as companies have grown
increasingly concerned about the coronavirus.
     "The PMIs tentatively suggest that our first-quarter growth
forecasts will prove too optimistic," said Simon Macadam, global
economist at Capital Economics, suggesting more pain may in
store for risk assets as investors reassess global growth
    Regional stocks fell, in line with a
downturn in global stocks, as investors worried about a
prolonged impact from the virus as China reported an uptick in
cases and the number doubled in South Korea, while more than 80
people tested positive for the virus in Japan.
    "The concern is that up till now this has been a China
problem, but now there is increasing concern that it is moving
to South Korea and Japan," said Jonathan Bell, chief investment
officer at Stanhope Capital. 
    Brazilian stocks lost more than 1% as iron ore miner
Vale SA slipped almost 4% after reporting an
unexpected quarterly loss.
    Vale severely missed quarterly profit and margin estimates, 
largely due to impairments related to its base metal and coal
operations and the lingering effects of a deadly dam burst in
January 2019.      
    Colombia's benchmark COLCAP index slid 2.7% in its
worst day in two years. Oil major Ecopetrol fell 0.4%,
tracking oil prices lower. 
    Brazil and Argentina geared up for an extended weekend on
account of the carnival festival, with markets set to reopen on
    Key Latin American stock indexes and currencies at 1843 GMT:
   Stock indexes            Latest    Daily %
 MSCI Emerging Markets       1083.25     -1.1
 MSCI LatAm                  2697.72     -1.2
 Brazil Bovespa            113098.44     -1.3
 Mexico IPC                 44790.75     0.04
 Chile IPSA                  4538.08     0.04
 Argentina MerVal           38578.89   -0.982
 Colombia COLCAP             1623.81    -2.74
       Currencies           Latest    Daily %
 Brazil real                  4.3870     0.09
 Mexico peso                 18.8560    -0.15
 Chile peso                    802.3     0.54
 Colombia peso                  3378     0.69
 Peru sol                      3.385     0.18
 Argentina peso              61.8375    -0.08
 (Reporting by Shreyashi Sanyal and Susan Mathew in Bengaluru
Editing by Marguerita Choy and Tom Brown)

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UPDATE 2-German bond yield bounces off four-month low after positive PMI surprise

(Recasts, adds chart)

By Yoruk Bahceli

LONDON, Feb 21 (Reuters) – Germany’s 10-year government bond yield bounced off four-month lows after a batch of business surveys delivered healthier-than-expected views of the euro zone economy.

First-estimate purchasing managers’ surveys showed the private sector in Germany, the bloc’s biggest economy, expanded at its fastest pace since August as growth in services activity made up for an easing recession in manufacturing. The coronavirus outbreak, however, may pose a threat to future exports.

Uncertainty stemming from the potential economic impact of the coronavirus outbreak has boosted demand for safe-haven bonds in recent weeks, while money markets have started to price a higher probability of a rate cut from the European Central Bank by the end of the year.

IHS Markit’s flash composite Purchasing Managers’ Index (PMI) for Germany, which tracks the manufacturing and services sectors that together account for more than two-thirds of the economy, beat the consensus forecast in a Reuters poll, although activity growth slowed on the previous month.

Business activity in France and the wider euro zone also expanded faster than expected in February, PMI surveys showed.

Ten-year German government bond yields fell to a four month low earlier on Friday at -0.46%, but bounced back up following the PMI release. They were last up 1 basis point at -0.44%.

The entire Dutch yield curve briefly returned to negative territory in earlier trade. The 30-year Dutch bond yield – the longest on the sovereign curve – fell to -0.012%, its lowest since Oct 10. It was last around 0.01%, down 2 bps points on the day.

The rise in yields following the data release was “tempered by the fact that we’ve got this ongoing issue that’s still developing,” said Rabobank strategist Lyn Graham-Taylor, as the situation around coronavirus has continued to evolve since the survey data was collected.

Should yields fall further, the German yield curve is next in line to return to negative territory, with the 30-year bond yield currently trading at 0.03%

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Foreign bond spree probably pushed ailing yen – analysts

* Yen drops 1.8% vs USD this week, worst since Sept. 2017

* Analysts suspect heavy buying of foreign bonds drove move

* Question marks over yen’s safe-haven status

By Tom Westbrook

SINGAPORE, Feb 21 (Reuters) – The Japanese yen fell nearly 2% against the dollar this week, even while other safe-havens have climbed, prompting investors to suspect a big shift in Japanese asset allocation and to ponder the currency’s place in global finance.

The drop, which occurred over hours and hours of sustained selling, points to a big flow of cash out of Japan.

Analysts who remember a similar sell down in 2014 reckon it was probably from the juggernaut Japanese Government Pension Investment Fund and that it was probably buying foreign bonds ahead of the end of the Japanese financial year in March.

“With around $1.5 trillion in assets under management, even modest changes to the portfolio represent potentially significant flows,” said Scotiabank’s chief FX strategist, Shaun Osborne. “Market speculation suggests GPIF’s allocation to foreign bonds could increase.”

The fund said it does not comment on its specific investment behaviour. It is not due to disclose portfolio changes until March.

Yet the slow-grind selling pattern over the past two days mirrors the 2014 drop. Flow data also shows a net $27 billion of foreign bond purchases by Japanese investors this month – noted by Standard Chartered and Rabobank as contributing to the yen’s drop.

It has caused particular unease this time because of weakness in Japan’s economy and signs for months that the yen is decoupling from other safe-haven assets such as gold or bonds.

The long-held logic for the yen’s safety has been that since Japan’s low interest rates have made it the world’s largest creditor, loaned cash would be called back in a crisis and so support the currency.

But since the opposite seems to have occurred, and it has happened amid worries about Japan’s fragile economy and the creeping spread of the coronavirus, some market participants are questioning the rationale for its safety status.

“The move in dollar/yen in the past few days is far too significant to be explained solely by (sentiment),” said Rabobank FX strategist Jane Foley.

“The U.S. dollar could increasingly become the favoured store of value for many investors.”

Japan also no longer has a monopoly on low interest rates, decreasing the currency’s attractiveness as means of funding other investments.

Since about June, the yen has not tracked gold or the yield on U.S. bonds as closely as it once did. And on Friday, Asian investors mostly left it behind even while other safe assets, such as gold and bonds, rallied.

To be sure, though, it did earn some reprieve at the beginning of London’s trading day on Friday, bouncing a bit to recoup about a fifth of its losses with traders pointing out its inverse relationship to the S&P 500 stock index seemed to stay intact.

“It’s doing exactly what it says on the tin, it’s just playing a little bit of catch up,” said David Bloom, Global head of FX at HSBC.

“I’m not saying the leopard has changed its spots. The leopard looks like the leopard. But if the S&P were to fall, and dollar/yen were to rise, now I’m worried about the leopard’s spots.”

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South Korea's February exports to China shrink as coronavirus hits supply chains

SEOUL (REUTERS) – South Korea’s exports to China slumped in the first 20 days of February and overall sales per working day tumbled, indicating a grim outlook for Asia’s fourth-largest economy as a coronavirus outbreak upends global supply chains.

Exports to China, where the epidemic originated, shrank 3.7 per cent on-year, customs data showed on Friday (Feb 21), signalling potentially worse to come over the next few months.

“Per-day exports to China probably was far worse” in seasonally adjusted terms, a Korea Customs Service official said after the data was released.

The outbound shipments are being seen as a bellwether for world trade as South Korea is the first major exporting economy to release data since the start of the epidemic.

Overseas sales rose 12.4 per cent in the first 20 days of February from a year earlier, though the uptick reflected less working days in the same period of the prior year.

On the other hand, average exports per working day suffered a sharp contraction, at 9.3 per cent after a 3.2 per cent fall seen for the first 10 days in February, as demand took a knock from the spread of the coronavirus.

Park Chong Hoon, a Standard Charted Korea economist, said the headline number was boosted by there being three more working days in the period this year than in 2019 due to the shifting Lunar New Year holiday.

“We should really focus on average exports per working day. The outbreak of the virus significantly tumbled shipments out of Korea, and it will only worsen in the coming months,” Mr Park said.

While shipments to China and Singapore contracted, exports to the United States and Vietnam soared 24.2 per cent and 19.8 per cent each, as South Korean goods fast become substitutes for those made in China, analysts said.

A breakdown of the trade data showed overseas sales of memory chips and car components jumped 15.4 per cent and 40.6 per cent respectively, even as exports of vessels tumbled 29 cent.

South Korea reported its first death from the virus and a surge in new cases on Thursday, spurring concerns about the spread of the disease outside China.

Analysts expect the outbreak to hurt global growth, and gloom is spreading among South Korean manufacturers, as companies see more delivery bottlenecks, production disruption and a downturn in consumer spending.

In Japan, factory activity suffered its steepest contraction in seven years in February, offering the clearest evidence yet of the epidemic’s damaging effects on Asia’s trade-reliant economies.

South Korean chipmaker SK Hynix, the world’s second-biggest maker of memory chips after compatriot Samsung Electronics, on Thursday said 800 of its workers had quarantined themselves as a precautionary measure to prevent the spread of the coronavirus after one trainee had close contact with a virus patient in the southeastern city of Daegu, the epicentre of an outbreak in South Korea.

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Asia's big economies already feeling the coronavirus impact

HONG KONG (BLOOMBERG) – Asia’s biggest economies are already feeling the brunt of the coronavirus shock.

Key gauges for manufacturing in Australia and Japan fell while early export orders for South Korea showed a slump in Chinese demand.

The warning signs come as finance chiefs from the world’s 20 biggest economies meet this weekend in Riyadh, Saudi Arabia for the first time since the virus outbreak.

How to cope with the economic fallout from the disease will dominate the  Group of 20 finance leaders’ discussions, Bank of Japan Governor Haruhiko Kuroda said in Tokyo on Friday (Feb 21) ahead of his departure for the talks.

Japanese manufacturing activity plunged amid recession risks in the world’s third largest economy. The Jibun Bank Japan Manufacturing Purchasing Managers Index registered 47.6 for the sharpest deterioration in conditions in more than seven years.

The epidemic has prompted economists to forecast recession in the world’s third-largest economy already reeling from an October sales tax hike and a typhoon.

In Australia a gauge of manufacturing activity fell further into negative territory amid mounting evidence of the virus fallout, along with a hit from massive bushfires.

The CBA Flash Composite PMI fell to 48.3 in February from 50.2, the steepest rate of reduction since the series began in May 2016.

While early South Korea trade figures for February showed a pick up, an increased number of working days from a year earlier glossed over the impact the virus is already having.

Exports during the first 20 days of the month rose 12 per cent from a year earlier. Shipments to China, South Korea’s biggest trade partner, fell 3.7 per cent during the first 20 days. The early reading is typically held up as a bellwether for global trade given South Korea’s central role as a manufacturer and exporter of electronics, ships and automobiles.


Economists warn the virus fallout is only just beginning.

“The global economy and financial markets have not seen the full impact of the coronavirus outbreak yet,” Citigroup economists led by Catherine Mann wrote in a note titled “Waiting for the Global Impact” that warned of a “dramatic” first quarter slowdown in China.

Slumping activity will add to pressure on governments and central banks to respond with more support for their economies, while also raising doubts about their capacity to respond.

Central banks in Asia have already stepped up action, with Indonesia, Philippines, and Thailand cutting rates recently, and others like Singapore planning significant fiscal stimulus. China has lowered a range of policy rates this month. Speculation is rising that the Bank of Korea could also deliver a cut next week.

Still, global debt is at record levels and interest rates in the world’s biggest economies are already at historic lows.

“If growth continues to slide, a key question for the G-20 will be whether its members can coordinate a response,” according to Bloomberg Economics Tom Orlik.

“Against a backdrop of resurgent nationalism, fractious trade disputes, and limited policy space, common purpose might be difficult to achieve, that’s another reason to be pessimistic on the outlook,” he wrote.

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GLOBAL MARKETS-Dollar slams yen and safe-haven status, gold gains

(Adds oil, gold settlement prices; updates other market index moves)

* Dollar bulldozes other currencies, yen at 10-month low

* China rate cut done, market focus returns to virus spread

* Gold prices near seven-year high

* World FX rates in 2020

By Herbert Lash

NEW YORK, Feb 20 (Reuters) – The rally in U.S. equities took a pause and the strong dollar got stronger on Thursday, rising to a three-year high against a basket of trading partner currencies, after a steep slide in the Japanese yen called into question its safe-haven status.

Gold prices hit their highest in seven years as investors sought safe-haven assets after a rise in the number of new coronavirus cases in South Korea. Oil prices rose, supported by China’s efforts to bolster its virus-weakened economy.

The dollar has surged almost 2% since Tuesday against the yen, reaching its highest in almost 10 months, and the greenback climbed to near three-year highs against the euro.

The dollar index of the world’s most-traded currencies was up 0.17% to its highest level since April 2017.

The index is up 3.6% this year. It also gained to its best levels of the year against China’s offshore yuan.

A host of reasons were cited for the dollar’s move, ranging from the outperformance of the U.S. economy and corporate earnings to potential recessions in Japan and the euro zone.

A run of dire economic news out of Japan has stirred talk the country is already in recession and that Japanese funds were dumping local assets in favor of U.S. shares and gold.

“The strongest explanation (for the yen’s decline) is a widespread selling by Japanese asset managers amid growing fears about the health of Japan’s economy,” said Raffi Boyadijian, investment analyst at XM.

The yen’s slide is unusual because the exchange rate with the dollar has been shedding its close correlation to the price of gold and U.S. Treasury yields, a development to be watched, he said.

“This raises question marks about whether the yen is losing some of its shine as the world’s preferred safe-haven currency,” Boyadijian said.

Investors are looking to buy U.S. assets and those stories that would be relatively unaffected by the cyclical environment, said Jason Draho, head of Americas asset allocation at UBS Global Wealth Management.

China reported a drop in new virus cases and announced an interest rate cut to buttress its economy. But South Korea recorded an increase in new cases, Japan reported two deaths and researchers said the pathogen seemed to spread more easily than previously believed.

A rally that had lifted major U.S. and European stock indexes to record highs this week lost steam, as investors fretted about the spread of the coronavirus outside of China.

MSCI’s gauge of stocks across the globe shed 0.68% and emerging market stocks lost 0.90%.

The pan-European STOXX 600 index lost 0.86%. Paris’ main index fell 0.8% as luxury stocks, which derive a chunk of their demand from Chinese customers, fell after the number of coronavirus cases outside China spiked.

LVMH, Kering and spirits maker Pernod Ricard slid between 2.2% and 3.5%.

Analysts cited a Global Times report that said a central Beijing hospital recorded 36 new cases among hospital staff and patients’ families, causing U.S. stocks to drop further on fear infections could be rising rapidly in the capital.

The Dow Jones Industrial Average fell 181.47 points, or 0.62%, to 29,166.56, the S&P 500 lost 20.03 points, or 0.59%, to 3,366.12 and the Nasdaq Composite dropped 91.57 points, or 0.93%, to 9,725.61.9,725.61

E*Trade jumped 22.1% after Morgan Stanley offered to buy it in a $13 billion stock deal, the biggest acquisition by a Wall Street bank since the financial crisis.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.5% overnight, led by drops in Hong Kong’s Hang Seng and South Korea’s KOSPI.

U.S. gold futures settled up 0.5% at $1,620.50 an ounce.

Spot gold rose 0.3% to $1,616.74 an ounce, after hitting its highest since February 2013 at $1,622.19.

Oil prices rose further after a U.S. report showed a draw in gasoline inventories and a much smaller-than-anticipated rise in crude stocks.

U.S. gasoline stockpiles fell 2 million barrels in the week to Feb. 14. Analysts had estimated an increase of 400,000 barrels.

Data from the U.S. Energy Information Administration (EIA) showed that crude inventories rose only 414,000 barrels last week, compared with a 2.5 million-barrel rise that analysts had expected in a Reuters poll.

Brent crude futures rose 19 cents to settle at $59.31 a barrel and West Texas Intermediate gained 49 cents to settle at $53.78 a barrel.

Demand for safe-haven U.S. Treasury debt was robust, driving the 30-year bond yield below the psychologically significant 2% level to its lowest since September 2019.

The 30-year bond last rose 36/32 in price to push its yield down to 1.9661%.

Benchmark 10-year notes last rose 15/32 in price to yield 1.5203%.

Longer-dated euro zone government bonds led a broad rally as concerns about an economic slowdown in the region and virus-related damage to Asian growth boosted demand for government debt.

The 10-year German government bond yield slid 3 basis points to -0.44%, close to 3-1/2-month lows reached earlier in February.

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UPDATE 4-Argentine bonds take it on the chin after IMF approves restructuring

(Adds comment from central bank chief)

By Hugh Bronstein

BUENOS AIRES, Feb 20 (Reuters) – Argentine bond prices fell 1.3% on Thursday after the International Monetary Fund essentially gave the government a green light to restructure its bonds, the latest chapter in the once-wealthy country’s long history of financial crises.

The Fund, wrapping up a week-long visit to Argentina, said rising public debts meant the country needs a definitive plan to restore debt sustainability, which would require a “meaningful contribution from private creditors.”

The question is how much of a haircut private creditors will be asked to take in the upcoming bond revamp.

“The IMF opened the door for Argentina to begin debt restructuring. Now the focus shifts to determining what a ‘meaningful contribution from private creditors’ means, and what will happen with the debt Argentina owes to the fund,” local brokerage SBS Group said in a report.

Argentine bond prices are down 4.8% so far this year. Country risk spreads stood 82 basis points wider at 2,117 over safe-haven U.S. Treasury paper, indicating an increase in the perceived likelihood of default.

Spreads have blown out from 1,770 basis points, where they ended 2019, as Argentina struggles to revamp about $100 billion in bonds and loans, including $44 billion owed to the IMF.

Central bank chief Miguel Pesce told local radio on Thursday that a bond default was possible but not probable.

“The government will make an offer, and that offer can be accepted or rejected. But the government will not accept any kind of proposal that is not sustainable in the short or long term,” Pesce said in an interview with radio station La Red.

One of the richest countries in the world a century ago, Argentina has suffered from decades of financial mismanagement. It has defaulted eight times in its history, with bondholders dragging the country through long court battles seeking payment.

Economy Minister Martin Guzman has said he wants to avoid a rancorous restructuring but vows to neither make unsustainable debt payments nor impose fiscal austerity on an economy in its third year of recession.

Alberto Bernal, chief emerging markets strategist at XP Investments in New York, said he was not surprised by the IMF statement and remained optimistic about chances for an investor-friendly debt re-negotiation.

“If Argentina wants to grow and get out of this mess, it has to treat bondholders with respect,” he said. “If it tries to take advantage of the bondholders, investors will fight and the macro situation will get worse.”

Guzman heads to Saudi Arabia on Thursday for a G20 meeting, where he is scheduled to meet with IMF chief Kristalina Georgieva and U.S. Treasury Secretary Steven Mnuchin.

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Brazil FX weakness a natural consequence of lower rates – Economy Minister Guedes

BRASILIA, Feb 20 (Reuters) – Brazil’s Economy Minister Paulo Guedes said on Thursday that a weaker domestic currency is to be expected given that interest rates have come down so much, stressing that the real is a floating exchange rate.

Speaking at an event in Brasilia alongside President Jair Bolsonaro and central bank chief Roberto Campos Neto, as the real slumped to a new all-time low against the dollar, Guedes also said Brazil’s economy will grow by more than 2% this year and beyond. (Reporting by Lisandra Paraguassu and Gabriel Ponte Writing by Jamie McGeever, Editing by Franklin Paul)

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CEE MARKETS-Forint extends losses, rising greenback drags down CEE FX

    By Radu-Sorin Marinas and Anita Komuves
    BUCHAREST/BUDAPEST, Feb 20 (Reuters) - Central European
currencies softened on Thursday, with Hungary's forint and the
Czech crown leading losses, mirroring other emerging currencies
pushed lower by a strengthening U.S. dollar and dogged by the
economic impact of the coronavirus outbreak.
    On a rollercoaster ride since Wednesday, the forint
 traded 0.3% down at 338.2 at 1020 GMT, extending
losses from the last session. 
    Boosted last week by a surprise hawkish message from the
Hungarian central bank, the forint opened at around 334 on
Wednesday before diving to 337. 
    The National Bank of Hungary on Wednesday expressed to local
banks its uneasiness with the pace of increase in BUBOR
interbank rates, two market sources told Reuters.

    However, the NBH told Reuters it did not currently see
"moves in BUBOR quotations that would be unwarranted by market
developments", and that the meeting was part of regular
consultations with local banks about interbank rates.
    A Budapest dealer said the forint weakened as a direct
consequence of the NBH's message, adding that the currency
falling back to its record low of 340 in the near future could
not be ruled out.
    "The central bank is watching and micro-managing two things
at the same time: trying to ensure the forint does not weaken to
340 right now and interbank rates don't shoot up," the dealer
    Reacting to the NBH's hawkish turn, the three-month BUBOR
rate has risen about 20 basis points in Hungary since last week.
On Thursday, it was quoted at 0.60%.
    The NBH will hold its next rate-setting meeting on Feb. 25
but any policy tweak is likely to come only in March, when the
bank will discuss its fresh inflation forecasts and publish its
inflation report.
    A Reuters poll of analysts showed the bank was expected to
leave interest rates unchanged next Tuesday.
    Hungary auctioned 12-month treasury bills on Thursday, where
the average yield jumped to 0.51% from 0.19% two weeks ago.

    The Czech crown has retreated past the
psychological 25/euro level, trading 0.15% down at 25.002,
followed by the Polish zloty and the Romanian leu
 with a 0.1% fall each.
    In Romania, the finance ministry plans to sell 600 million
lei ($135.51 million) of September 2023 treasury bonds at tender
and an additional 300 million lei of 364-day paper.

            CEE        SNAPSHOT   AT                      
            MARKETS              1120 CET           
                       Latest    Previous  Daily    Change
                       bid       close     change   in
 Czech                  24.9950   24.9710   -0.10%   +1.75
 crown                                                   %
 Hungary               338.2500  337.1800   -0.32%  -2.10%
 Polish                  4.2759    4.2711   -0.11%  -0.46%
 Romanian                4.7825    4.7790   -0.07%   +0.12
 leu                                                     %
 Croatian              Real-Tim    7.4455    N.A.    N.A.
 kuna                  e Engine                     
 Serbian               Real-Tim  117.5500   N.A.     N.A.
 dinar                 e Engine                     
 Note:      calculated from                1800           
 daily                                     CET      
                       Latest    Previous  Daily    Change
                                 close     change   in
 Prague                 1103.84  1104.210   -0.03%  -1.06%
 Budapest              45989.87  46182.09   -0.42%  -0.20%
 Warsaw                 2114.39   2115.18   -0.04%  -1.66%
 Bucharest             10173.70  10204.97   -0.31%   +1.97
 Ljubljana               984.54    983.78   +0.08%   +6.34
 Zagreb                 2025.36   2029.53   -0.21%   +0.39
 Belgrade   <.BELEX15    791.31    817.64   -3.22%  -1.29%
 Sofia                   547.97    548.91   -0.17%  -3.55%
                       Yield     Yield     Spread   Daily
                       (bid)     change    vs Bund  change
 Czech                                              spread
   2-year   <CZ2YT=RR    1.7700   -0.0100   +241bp   -1bps
            >                                    s  
   5-year   <CZ5YT=RR    1.6110   -0.0780   +223bp   -8bps
            >                                    s  
   10-year  <CZ10YT=R    1.6030    0.0330   +202bp   +4bps
            R>                                   s  
   2-year   <PL2YT=RR    1.5580   -0.0020   +220bp   +0bps
            >                                    s  
   5-year   <PL5YT=RR    1.8200    0.0010   +244bp   +0bps
            >                                    s  
   10-year  <PL10YT=R    2.1370   -0.0110   +256bp   -1bps
            R>                                   s  
                       3x6       6x9       9x12     3M
 Czech Rep          <  Real-Tim  Real-Tim  Real-Ti  Real-T
            PRIBOR=>   e Engine  e Engine  me       ime
                       Initiali  Initiali  Engine   Engine
                       zation    zation    Initial  Initia
                       Error     Error     ization  lizati
                                           Error    on
 Hungary            <  Real-Tim  Real-Tim  Real-Ti  Real-T
            BUBOR=>    e Engine  e Engine  me       ime
                       Initiali  Initiali  Engine   Engine
                       zation    zation    Initial  Initia
                       Error     Error     ization  lizati
                                           Error    on
 Poland             <  Real-Tim  Real-Tim  Real-Ti  Real-T
            WIBOR=>    e Engine  e Engine  me       ime
                       Initiali  Initiali  Engine   Engine
                       zation    zation    Initial  Initia
                       Error     Error     ization  lizati
                                           Error    on
 Note: FRA  are for ask prices                            
 (Reporting by Krisztina Than and Radu Marinas; Editing by
Ramakrishnan M.)

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UPDATE 1-Euro zone yields slip on economic, coronavirus worries

* German, core yields down 1-2 bps in early trading

* Traders await euro zone PMI numbers on Friday

* Euro zone periphery govt bond yields (Adds details, latest prices)

LONDON, Feb 20 (Reuters) – Euro zone bond yields edged lower on Thursday as concern about a economic slowdown in the region and damage to Asian growth from China’s coronavirus kept core yields near two-week lows.

Worries about the euro zone economy after a string of weak data have kept safe-haven government debt like Germany’s well-supported. Purchasing managers indexes and euro zone inflation numbers are released on Friday.

The economic effects of the coronavirus in the euro zone are still unknown, but yields have already priced in much of the outlook, particularly in Germany, said Jan von Gerich, an analyst at Nordea.

“It seems like the lower yields already account for the weakening outlook,” he said. “The problem for yields to go even lower is that the ECB (European Central Bank) doesn’t seem keen on any more easing. The bulk of the slowdown is priced in.”

ECB minutes from its last meeting will be published later on Thursday. Analysts are not expecting market-moving information.

The 10-year German government bond yield was down 1 basis point at -0.428%, close to three-and-a-half-month lows of -0.447% reached earlier in February. Other core euro zone yields were also down by 1 to 2 basis points.

The coronavirus continues to shape risk appetite. China has reported a large drop in new cases and announced an interest rate cut to buttress its economy. However, South Korea reported a jump in new cases, two people died in Japan and researchers said the virus spreads more easily than previously believed.

Italy’s 10-year bond yield traded down 2 basis points at 0.924%, its lowest since Feb. 3, but the country’s bonds largely shrugged off renewed concerns about a breakdown in the governing coalition as investors hunted for better returns in markets like Italy and Greece.

Analysts at Unicredit said Matteo Renzi, leader of Italy Alive, had further raised tensions within the coalition this week but did not announce any steps that could cause a government crisis.

“We regard recent political developments mostly as noise, but recognize that uncertainty is on the rise,” they wrote, noting that the spread between Italian and German bond yields had widened but remained below 140 basis points.

The Spanish 10-year bond yield dropped 3 basis points to 0.242%, (Reporting by Tommy Reggiori Wilkes, editing by Larry King, Kirsten Donovan)

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