October 17, 2016 / 2:47 PM / 10 months ago

CEE MARKETS-Zloty hits one-month low, yield curves steepen on Yellen

* Currencies ease after Yellen's "high-pressure economy"
comments
    * Bucharest stocks ease ahead of vote on CHF loan conversion
bill

 (Adds zloty low, new comments)
    By Sandor Peto and Jakub Iglewski
    BUDAPEST/WARSAW, Oct 17 (Reuters) - Central European
currencies were under pressure against the euro on Monday, with
Poland's zloty touching a one-month low, on comments
suggesting U.S. policymakers may be prepared to let inflation to
run above target.
    Yields on longer-dated government bonds rose, tracking a
similar move in the U.S. and the euro zone, after Federal
Reserve Chair Janet Yellen said on Friday the Fed may need to
run a "high-pressure" economy to reverse damage from the
2008-2009 financial crisis. 
    That triggered expectations that the next U.S. rate hike may
be later, but also bigger, than expected.
    Short-term central European debt yields, which remain high
relative to those offered in the euro zone and the United States
and so attractive to investors, held firm or extended recent
gains. 
    The zloty eased 0.7 percent to 4.3335 against the
euro by 1352 GMT, off a one-month low at 4.3375. The forint
 shed 0.6 percent to 307.5.
    "If the Fed stays behind the curve, it may need a bigger
interest rate hike in the end -- no good news for emerging
market currencies," one Budapest-based dealer said.
    The dollar romped to a nearly seven-month high and the U.S.
yield curve steepened as prices on longer-dated Treasuries,
which are most sensitive to inflation expectations, fell sharply
and their yields shot higher. 
    European bond yields also rose ahead of Thursday's European
Central bank policy meeting.
    The yield on Hungary's three-year bond dropped 2 basis
points to 1.33 percent. Poland's two-year yield was steady at
1.75 percent, while the 10-year yield rose 3 basis points to
3.06 percent.
    Yields on Czech government bonds with maturities longer than
3 years headed higher after the finance ministry announced a
heavy November issuance calendar.   
    Stocks in the European Union's emerging east mostly shrugged
off falls in equity markets around the world. 
    Czech energy group CEZ firmed 1.3 percent,
outperforming the Prague market, after its Temelin nuclear
power station went back online at the weekend for the first time
since August. 
    Hungary's FHB rebounded from a fall after the
bank's Chairman Zoltan Speder, a businessmen who fell out of
favour with Prime Minister Viktor Orban, resigned. 
    In Warsaw, state-run insurer PZU rose 3.2 percent,
after a report that it would pay 11 billion zloty for an about
30 percent stake in Pekao from Italy's UniCredit
. 
    The deal will still allow PZU to pay a dividend, said Piotr
Kopec, equity trader at Wood & Co in Warsaw. 
           CEE      SNAP   AT  1522       
           MARKETS  SHOT  CET         
                    CURRENCIES            
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                    bid   clos  chan  in
                          e     ge    2016
 Czech     <EURCZK  27.0  27.0   +0.  -0.0
 crown     =>        230   255   01%    9%
 Hungary   <EURHUF  307.  305.  -0.6  2.32
 forint    =>       5000  5500    3%     %
 Polish    <EURPLN  4.33  4.30  -0.7  -1.7
 zloty     =>         35    34    0%    4%
 Romanian  <EURRON  4.50  4.50   +0.  0.28
 leu       =>         65    78   03%     %
 Croatian  <EURHRK  7.50  7.50   +0.  1.81
 kuna      =>         30    75   06%     %
 Serbian   <EURRSD  123.  123.  -0.0  -1.3
 dinar     =>       1500  1200    2%    6%
 Note:     calcula  prev  clos  1800      
 daily     ted      ious  e at  CET   
 change    from                       
                    STOC                  
                    KS                
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                          clos  chan  in
                          e     ge    2016
 Prague             905.  899.   +0.  -5.3
                      46    16   70%    2%
 Budapest           2865  2839   +0.   +19
                    1.77  2.01   91%  .78%
 Warsaw    <.WIG20  1721  1719   +0.  -7.4
           >         .46   .64   11%    1%
 Buchares           6878  6897  -0.2  -1.7
 t                   .66   .37    7%    9%
 Ljubljan  <.SBITO  723.  724.  -0.1   +3.
 a         P>         11    15    4%   87%
 Zagreb    <.CRBEX  1970  1972  -0.0   +16
           >         .68   .42    9%  .63%
 Belgrade  <.BELEX  640.  640.   +0.  -0.5
           15>        31    13   03%    9%
 Sofia     <.SOFIX  508.  508.   +0.   +10
           >          87    69   04%  .41%
                    BOND                  
                    S                 
                    Yiel  Yiel  Spre  Dail
                    d     d     ad    y
                    (bid  chan  vs    chan
                    )     ge    Bund  ge
                                      in
 Czech                                spre
 Republic                             ad
   2-year  <CZ2YT=  -0.6  0.01  -002   +2b
           RR>        74     8   bps    ps
   5-year  <CZ5YT=  -0.1  0.02   +03   +2b
           RR>        02     5  7bps    ps
           <CZ10YT  0.38  0.06   +03   +4b
 10-year   =RR>        9     1  2bps    ps
 Poland                                   
   2-year  <PL2YT=  1.77  0.00   +24   +0b
           RR>         2     3  2bps    ps
   5-year  <PL5YT=  2.49  0.03   +29   +2b
           RR>         6        7bps    ps
           <PL10YT  3.06  0.03   +30   +2b
 10-year   =RR>        9     2  0bps    ps
           FORWARD  RATE  AGREEMENT       
                    3x6   6x9   9x12  3M
                                      inte
                                      rban
                                      k
 Czech     <CZKFRA  0.28  0.25  0.22     0
 Rep       ><PRIBO                    
           R=>                        
 Hungary   <HUFFRA  0.74  0.71  0.72  0.85
           ><BUBOR                    
           =>                         
 Poland    <PLNFRA  1.73  1.73  1.73  1.72
           ><WIBOR     5     5     5  
           =>                         
 Note:     are for                        
 FRA       ask                        
 quotes    prices                     
 *****************************************
 *********************
 
 (Reporting by Sandor Peto)

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