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CEE MARKETS-Forex, bonds ease as markets price in ECB rate hike within a year
March 10, 2017 / 10:24 AM / 9 months ago

CEE MARKETS-Forex, bonds ease as markets price in ECB rate hike within a year

    * ECB optimism over economy leads to CEE fx, bond price fall
    * Leu at 9-month low, forint a 3-month low, zloty a 3-week
low
    * Politics weigh on leu, Romanian CPI stays near zero

    By Sandor Peto
    BUDAPEST, March 10 (Reuters) - Central European currencies
and government bonds eased on Friday after the European Central
Bank hinted the previous day that it is slowly moving towards
tighter policy.
    Romania's leu, troubled by domestic political
tension in the past six weeks, touched its weakest levels since
regional market jitters around Britain's referendum which
decided on leaving the European Union.
    The prospect of Federal Reserve rate hikes, including one
next week, was weighing on assets in the region, which become
relatively less attractive if the returns on dollar assets rise.
    Nevertheless, U.S. labour market figures due at 1330 GMT are
unlikely to weaken central European asset prices further even if
they underpin the prospect of Fed hikes, one Budapest-based
fixed income trader said.
    "Extremely good figures are priced in, so any further impact
is unlikely," the trader said.
    Central European assets have been buoyed by the region's
healthy economic growth outlook and loose monetary policies,
also helped by the ECB's low interest rates and asset buying.
    The ECB did not signal cuts in asset buying after its
meeting on Thursday, but after its optimistic comments on the
economy, money markets priced in an ECB rate hike by March 2018.

    Hungarian government bond yields rose by about 3 basis
points on Friday, with 10-year paper trading at 3.6 percent, the
highest for several months. Poland's equivalent yield rose 2
basis points to 3.74 percent and was 4 basis points above its
levels before the ECB's news conference.
    The forint touched a three-month low at 312.15
against the euro before regaining some ground.
    The zloty set a three-week low and was 0.1 percent
lower at 4.328 at 0928 GMT.
    "Recent CEE FX moves could be seen as an indication for
tougher times ahead for CEE EM markets due to a bad combination
of current tight pricing, more Fed hikes, a somewhat less
expansionary ECB and still dovish central banks...," Raiffeisen
analyst Gunter Deuber said in a note.
    Regional central banks have not shown signs of concern over
a sharp rebound in inflation. Poland and Hungary are unlikely to
start to hike interest rates before 2018.
    A poll of analysts projected on Thursday some rise in
Romanian interest rates by the end of 2017.
    But February figures released on Friday showed inflation
sticking to levels near zero.
    The leu traded near the nine-month low of 4.555 it touched 
after the ECB news conference.
    It had been hit earlier this week by political worries as a
government lawmaker proposed extending a draft bill granting
prison pardons to include corruption offences.
    
              CEE        SNAPS   AT  1028          
              MARKETS    HOT    CET           
                         CURRENCIES                
                         Lates  Previ  Daily  Chang
                         t      ous           e
                         bid    close  chang  in
                                       e      2017
 Czech crown             27.02  27.02   +0.0  -0.05
                            00     35     1%      %
 Hungary                 311.8  311.8  -0.01  -0.97
 forint                    500    050      %      %
 Polish                  4.328  4.323  -0.11  1.75%
 zloty                       0      5      %  
 Romanian                4.551  4.550   +0.0  -0.35
 leu                         0      9     0%      %
 Croatian                7.440  7.428  -0.15  1.55%
 kuna                        0      5      %  
 Serbian                 123.8  123.9   +0.1  -0.39
 dinar                     300    700     1%      %
 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                  978.4  974.0   +0.4   +6.1
                             0      1     5%     6%
 Budapest                32980  32986  -0.02   +3.0
                           .39    .86      %     5%
 Warsaw                  2215.  2189.   +1.1   +13.
                            05     66     6%    71%
 Bucharest               7885.  7870.   +0.1   +11.
                            61     27     9%    30%
 Ljubljana               792.1  788.5   +0.4   +10.
                             8      8     6%    39%
 Zagreb                  2217.  2218.  -0.04   +11.
                            61     41      %    17%
 Belgrade     <.BELEX15  737.7  736.0   +0.2   +2.8
              >              8      0     4%     5%
 Sofia                   622.1  621.0   +0.1   +6.0
                             5      8     7%     9%
                         BONDS                     
                         Yield  Yield  Sprea  Daily
                                       d      
                         (bid)  chang  vs     chang
                                e      Bund   e in
 Czech                                        sprea
 Republic                                     d
   2-year     <CZ2YT=RR  -0.64  0.049   +021   +4bp
              >              4           bps      s
   5-year     <CZ5YT=RR  0.027  -0.00   +039  -3bps
              >                     2    bps  
   10-year    <CZ10YT=R  0.733  0.012   +030   +0bp
              R>                         bps      s
 Poland                                            
   2-year     <PL2YT=RR   2.14  0.008   +299   +0bp
              >                          bps      s
   5-year     <PL5YT=RR  3.089  0.009   +346  -2bps
              >                          bps  
   10-year    <PL10YT=R  3.773  0.035   +334   +2bp
              R>                         bps      s
              FORWARD    RATE   AGREEMENT          
                         3x6    6x9    9x12   3M
                                              inter
                                              bank
 Czech Rep            <    0.3   0.35   0.43      0
              PRIBOR=>                        
 Hungary              <   0.32   0.45   0.63   0.23
              BUBOR=>                         
 Poland               <  1.765    1.8   1.86   1.73
              WIBOR=>                         
 Note: FRA    are for                              
 quotes       ask                             
              prices                          
 **************************************************
 ************
 
 (Additional reporting by Radu Marinas in Bucharest)
  
 
 

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