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CEE MARKETS-Crown rebounds after strong output data, Serbia seen holding rates
December 7, 2017 / 10:16 AM / in 10 days

CEE MARKETS-Crown rebounds after strong output data, Serbia seen holding rates

    * Czech Oct industrial output surges by mnore than 10 pct
    * Crown is off 3-week low, timing and scope of rate hikes
mulled
    * Serbian central bank meets, key rate seen on hold at 3.5
pct
    * Polish ruling party to meet, likely to replace PM Szydlo

    By Sandor Peto and Robert Muller
    BUDAPEST/PRAGUE, Dec 7 (Reuters) - The crown
rebounded from 3-week lows on Thursday as October Czech
industrial output and trade account figures underpinned healthy
and balanced economic expansion.
    Czechs were a leader of Central Europe's robust growth in
the third quarter, with 5 percent annual output rise.
    Thursday's data showed 10.5 percent annual surge in Czech
industrial output, and the trade account remained in a surplus,
even though smaller than expected.
    The crown, with 5.5 percent gain versus the euro so far this
year, became the world's top-performing currency in 2017 after
the central bank (CNB) removed a cap on it in April, boosted by
the strong economy and two CNB rate hikes since August  
    The currency reached a 3-week low of 25.696 on Wednesday
amid doubts if the CNB continues to raise rates at its meeting
next week, but firmed mildly to 25.617 by 1004 GMT on Thursday.
    Investments could rise further next year, said Viktor
Zeisel, analyst at Komercni Banka.
    "We expect a (CNB) rate hike in each quarter of the next
year," he added.
    The region's and the Czech Republic's worsening labour
shortage forces firms to invest in efficiency and automation,
Erste analyst Jiri Polansky said.
    The output data, though it heralds higher wage growth, will
not increase pressure on the CNB to hike rates because a rise in
productivity-enhancing investment moderates inflation, he added.
    A Reuters poll of analysts showed that the crown is seen
leading the forint and the zloty higher next
year.
    Elsewhere, the dinar eased 0.1 percent to 119.65
against the euro ahead of the Serbian central bank's meeting
where it is expected to keep the region's highest benchmark rate
on hold at 3.5 percent. 
    It would not put further pressure on the dinar by cutting
rates, on top of expectation that the Federal Reserve will hike
rates next week, Raiffeisen analyst Stephan Imre said in a note.
    That is relevant due to a high share of dollar investors in
Belgrade's bond market, he said.
    In Romania, an auction of 3-year papers is expected to draw
healthy demand and see a cut-off yield near Wednesday's closing
mid of 3.4 percent, ING analysts said in a note.
    The bond originally launched in August has reached a
historic high, along with other Romanian yields boosted by
concerns that inflation will surge in the economy which grew 8.8
percent in annual terms in the third quarter.
    The rise has revived interest among non-resident
yield-hunters, Imre said.
    In Warsaw, the zloty firmed slightly.
    Top officials of the ruling party PiS, meeting after markets
close, are expected to replace Prime Minister Beata Szydlo. The
likely replacement is her deputy, Mateusz Morawiecki, who would
be a market-friendly choice, analysts said.   
    
               CEE MARKETS  SNAPSH   AT  1104 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.617  25.619   +0.01   5.43%
                                 0       5       %  
 Hungary                    314.60  314.46  -0.04%  -1.84%
 forint                         00      50          
 Polish zloty               4.2110  4.2140   +0.07   4.58%
                                                 %  
 Romanian leu               4.6325  4.6291  -0.07%  -2.10%
 Croatian                   7.5370  7.5472   +0.14   0.24%
 kuna                                            %  
 Serbian                    119.65  119.49  -0.13%   3.09%
 dinar                          00      00          
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1056.0  1053.1   +0.28   +14.5
                                 8       5       %      9%
 Budapest                   37851.  37591.   +0.69   +18.2
                                81      53       %      8%
 Warsaw                     2406.4  2394.6   +0.49   +23.5
                                 9       7       %      4%
 Bucharest                  7672.3  7670.1   +0.03   +8.29
                                 1       6       %       %
 Ljubljana                  779.15  773.03   +0.79   +8.58
                                                 %       %
 Zagreb                     1863.5  1853.2   +0.56  -6.58%
                                 9       3       %  
 Belgrade                   743.97  743.97   +0.00   +3.71
                                                 %       %
 Sofia                      667.41  666.31   +0.17   +13.8
                                                 %      1%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.075   0.072   +082b   +7bps
                                                ps  
   5-year                    0.801   0.015   +118b   +2bps
                                                ps  
   10-year                    1.42  -0.001   +112b   +0bps
                                                ps  
 Poland                                                   
   2-year                    1.656   0.006   +240b   +0bps
                                                ps  
   5-year                    2.657   0.023   +304b   +2bps
                                                ps  
   10-year                   3.258   0.004   +295b   +0bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.99    1.19    1.31       0
               IBOR=>                               
 Hungary               <BU   0.085   0.135    0.17    0.03
               BOR=>                                
 Poland                <WI   1.773   1.818   1.919    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
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