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CEE MARKETS-Bonds ease on U.S. Treasuries, Hungarian CPI rise
March 8, 2017 / 10:35 AM / 6 months ago

CEE MARKETS-Bonds ease on U.S. Treasuries, Hungarian CPI rise

    * Hungary's CPI at 4-year high, no monetary policy change is
seen
    * Polish central bank expected to keep rates on hold
    * Czech auctions seen drawing strong demand on cap
speculation

    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, March 8 (Reuters) - Hungarian long-term
government bonds eased on Wednesday as   inflation rose to a
4-year high and Fed rate hike expectations lifted U.S. Treasury
yields.
    In Prague, investors prepared for a strong bond auction
despite ultra-low yields, amid speculation that the Czech
central bank will remove its cap on the crown's value soon.
    Poland's central bank is seen keeping interest rates on hold
at its meeting, and at least until early 2018.
    The zloty eased 0.2 percent against the euro by
0948 GMT, but at 4.3123 it was well within the past five weeks'
trading ranges. 
    Hungary's annual inflation rose to a higher-than-expected
2.9 percent in February from 2.3 percent in January.
    The forint pierced the 310 level against the euro
for the first time in over a month late on Tuesday, and traded
steady on Wednesday, after briefly dipping to a 5-week low.
    Hungary's 10-year government bond yield rose 2 basis points
to 3.47 percent. The corresponding Polish yield rose 3 basis
points to 3.725 percent.
    The inflation rise is unlikely to change expectations that
Hungary's central bank, the most dovish in the region, will not
start to tighten its policy before next year.
    The new figure "does not overwrite the existing inflation
path, which contains an expected slowdown in the second half of
2017," said ING analyst Peter Virovacz in a note.
    A rise in inflation has not worried central banks in the
region so far.
    If Czech figures due on Thursday follow the Hungarian rise,
that could further boost expectations that the central bank
would seek to get rid soon of its cap, which has been keeping
the crown weaker than 27 against the euro since 2013.
    Speculation for a crown firming after the exit has boosted
demand for the currency and forced the bank to boost its foreign
currency reserves by 25 percent in the first two months of 2017,
defending the cap.
    It projects the exit for mid-2017, but some analysts expect
it as early as in April. That could boost demand for Czech bonds
offered at Wednesday's auction.
    "We wait for tomorrow's crucial CPI print for the month of
February in order to better time the possible CZKexit (cap exit)
date," Raiffeisen analysts said in a note.
    "Mainly due to recent inflationary developments the CZKexit
is, in our view, becoming increasingly likely rather sooner than
later which could pull another wave of speculative capital to
Czech koruna markets," they added.
    
              CEE        SNAPS   AT  1048          
              MARKETS    HOT    CET           
                         CURRENCIES                
                         Lates  Previ  Daily  Chang
                         t      ous           e
                         bid    close  chang  in
                                       e      2017
 Czech crown             27.02  27.03   +0.0  -0.05
                            10     35     5%      %
 Hungary                 310.1  310.1   +0.0  -0.44
 forint                    800    850     0%      %
 Polish                  4.312  4.304  -0.19  2.12%
 zloty                       3      1      %  
 Romanian                4.547  4.543  -0.07  -0.26
 leu                         0      8      %      %
 Croatian                7.410  7.409   +0.0  1.96%
 kuna                        0      9     0%  
 Serbian                 123.7  123.7   +0.0  -0.28
 dinar                     000    600     5%      %
 Note: daily  calculate  previ  close  1800        
 change       d from     ous    at     CET    
                         STOCK                     
                         S                    
                         Lates  Previ  Daily  Chang
                         t      ous           e
                                close  chang  in
                                       e      2017
 Prague                  972.5  971.7   +0.0   +5.5
                             9      0     9%     3%
 Budapest                32609  32442   +0.5   +1.8
                           .40    .20     2%     9%
 Warsaw                  2213.  2200.   +0.5   +13.
                            24     98     6%    62%
 Bucharest               7917.  7905.   +0.1   +11.
                            50     57     5%    75%
 Ljubljana               784.8  784.1   +0.1   +9.3
                             5      0     0%     7%
 Zagreb                  2217.  2209.   +0.3   +11.
                            85     86     6%    18%
 Belgrade     <.BELEX15  730.7  740.5  -1.32   +1.8
              >              9      8      %     7%
 Sofia                   621.8  621.9  -0.02   +6.0
                             1      6      %     3%
                         BONDS                     
                         Yield  Yield  Sprea  Daily
                                       d      
                         (bid)  chang  vs     chang
                                e      Bund   e in
 Czech                                        sprea
 Republic                                     d
   2-year     <CZ2YT=RR  -0.62  -0.00   +024  -1bps
              >              5      9    bps  
   5-year     <CZ5YT=RR  0.065  0.067   +051   +4bp
              >                          bps      s
   10-year    <CZ10YT=R  0.688  0.038   +034   +1bp
              R>                         bps      s
 Poland                                            
   2-year     <PL2YT=RR  2.164  -0.02   +303  -3bps
              >                     7    bps  
   5-year     <PL5YT=RR   3.07   0.04   +352   +2bp
              >                          bps      s
   10-year    <PL10YT=R  3.725  0.014   +338  -2bps
              R>                         bps  
              FORWARD    RATE   AGREEMENT          
                         3x6    6x9    9x12   3M
                                              inter
                                              bank
 Czech Rep            <   0.29   0.33   0.41      0
              PRIBOR=>                        
 Hungary              <    0.3   0.45   0.59   0.23
              BUBOR=>                         
 Poland               <   1.79   1.82   1.91   1.73
              WIBOR=>                         
 Note: FRA    are for                              
 quotes       ask                             
              prices                          
 **************************************************
 ************
 
 (Reporting by Sandor Peto; Editing by Mark Trevelyan)
  
 
 

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