October 13, 2017 / 9:49 AM / in 10 days

CEE MARKETS-Currencies, bonds firm as ECB seen extending asset buying

    * Forint, zloty set multi-week highs on ECB expectations
    * U.S. CPI data watched, but Dec Fed hike is priced anyway
    * Hawkish rate setter comments give limited help to crown

    By Sandor Peto
    BUDAPEST, Oct 13 (Reuters) - Central European currencies and
government bonds mostly firmed slightly after sources told
Reuters that the European Central Bank is likely to extend its
asset purchases.    
    The also crown got some support from hawkish comments from
Czech central banker Vojtech Benda.
    And Romania's ruling Social Democrats, at a party meeting
late on Thursday, endorsed a proposed government reshuffle,
which had been weighing on Bucharest asset prices.
    But price movements in regional markets were limited due to
the caution ahead of U.S. inflation figures due in the
afternoon. Signs of the Fed moving towards an interest rate rise
could make regional assets less attractive as the potential
reward over U.S. assets diminishes. 
    "The figures, even if they increase the odds of a December
Fed rate hike, could not cause a big market retreat: a hike
looks like a done deal, anyway," one Budapest-based fixed income
trader said.
    "The report on the ECB had more weight: markets have taken
it as a dovish signal," the trader added.
    Five people with direct knowledge of the discussion told
Reuters that ECB policymakers broadly agreed to extend asset
purchases at a lower volume at their October meeting, with views
converging on a nine-month extension, and ranging between 25
billion and 40 billion euros a month, compared with 60 billion
euros now. 
    The ECB's asset purchases in the euro zone have indirectly
also lifted demand for relatively high-yielding Central European
assets.
    Hungarian government bond yields dropped by 2-3 basis
points. The 10-year benchmark paper traded at 2.59 percent.
    The Polish yield curve flattened a little, with the 10-year
yield dropping 4 basis points to 3.335 percent, its lowest level
since a downtrend of the dollar started to trigger zloty and
forint buying early this month.
    The zloty, gaining 0.2 percent by 0858 GMT, hit a
one-month high against the euro.
    The forint firmed 0.1 percent to 308.35, touching
a 3-week high. Piercing its 200-day moving average, it may head
to 307, Erste Group's Budapest brokerage arm said in a note. 
    Its firming through 310 on Wednesday already boosted
speculation that the Hungarian central bank may further loosen
monetary policy screws.
    In Poland, FRAs <PLN12X15F= > have showed an opposite trend,
with expectations strengthening that the Polish central bank
will start to hike interest rates earlier than late 2018.
    The Czech has been the only central bank in the European
Union that has increased rates since 2012.
    The economy would benefit from a 50-75 basis point interest
rate increase before the end of this year, one of the seven
Czech central bank rate setters, Vojtech Benda was quoted as
saying on Thursday.
    The crown firmed only 0.1 percent on Friday to
25.843 against the euro.
    "Mr. Benda is just one of 7 illuminatis," Komercni Banka
traders said in a note. 
    
               CEE MARKETS  SNAPSH   AT  1058 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.843  25.868   +0.10   4.50%
                                 0       5       %  
 Hungary                    308.35  308.60   +0.08   0.15%
 forint                         00      50       %  
 Polish zloty               4.2604  4.2675   +0.17   3.37%
                                                 %  
 Romanian leu               4.5880  4.5890   +0.02  -1.16%
                                                 %  
 Croatian                   7.5100  7.5097   +0.00   0.60%
 kuna                                            %  
 Serbian                    119.30  119.36   +0.05   3.39%
 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                     1053.0  1054.8  -0.17%   +14.2
                                 4       8              6%
 Budapest                   38591.  38772.  -0.46%   +20.5
                                98      08              9%
 Warsaw                     2532.8  2537.6  -0.19%   +30.0
                                 2       9              3%
 Bucharest                  8030.9  7997.2   +0.42   +13.3
                                 0       2       %      5%
 Ljubljana                  815.87  813.57   +0.28   +13.7
                                                 %      0%
 Zagreb                     1862.0  1863.2  -0.07%  -6.66%
                                 7       9          
 Belgrade                   725.54  727.79  -0.31%   +1.14
                                                         %
 Sofia                      669.78  668.31   +0.22   +14.2
                                                 %      1%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.086       0   +081b   +1bps
                                                ps  
   5-year                    0.527   0.014   +082b   +3bps
                                                ps  
   10-year                   1.366  -0.006   +094b   +2bps
                                                ps  
 Poland                                                   
   2-year                    1.714  -0.007   +243b   +0bps
                                                ps  
   5-year                    2.681  -0.005   +298b   +2bps
                                                ps  
   10-year                   3.343  -0.024   +292b   +0bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.78    0.91    1.03       0
               IBOR=>                               
 Hungary               <BU    0.08    0.11    0.15       0
               BOR=>                                
 Poland                <WI   1.764   1.805   1.874    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting by Jason Hovet in Prague; Editing by
Alison Williams)
  
 
 

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