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CEE MARKETS-Czech crown rebounds after strong industrial data
November 6, 2017 / 10:52 AM / a month ago

CEE MARKETS-Czech crown rebounds after strong industrial data

    * Czech retail, industry output growth exceed forecasts
    * Crown rebounds after initial fall, c.bank outlook mulled

    By Sandor Peto
    BUDAPEST, Nov 6 (Reuters) - The Czech crown quickly recouped
all its early losses on Monday as strong industrial output and
retail data reinforced expectations for further central bank
(CNB) interest rate hikes.
    Last Thursday the CNB delivered its second 25-basis-point
hike since August, but its forward-looking comments were less
hawkish than expected and knocked the crown off
four-year highs against the euro.
    The currency shed a quarter of a percent on Monday before
reversing direction after the data.  
    Industrial output rose by 4.4 percent in annual terms in
September and retail sales by 6.2 percent. Both figures exceeded
analysts' forecasts.
    The crown traded at 25.63 against the euro at 0956 GMT, flat
from Friday, while most Central European currencies were little
changed.
    "The development in industry suggests that the Czech economy
remains in an excellent shape, at the same time, it is already
in the phase of overheating, at least regarding the job market,"
said Jiri Pour, analyst at UniCredit.
    "We expect a future cooling of the industrial production, or
the whole economy, on the side of the key automotive segment,
because demand in Europe will probably gradually approach the
point of saturation. However, we don't see any reason for
pessimism so far," he added.
    The bid yield on Czech two-year government bonds, boosted in
the past weeks by rate hike expectations, rose to its highest
level since April 2014, to 0.395 percent on Monday.
    But the CNB's cautious guidance could arrest near-term
upside yield pressure, Raiffeisen analyst Gunter Deuber said in
a note.
    Elsewhere in the region, the Romanian and Polish central
banks are expected to keep their main rates on hold at their
respective meetings on Tuesday and Wednesday.
[nL8N1N94U3 
    Poland's October data showed a retreat in inflation, but
most analysts expect rising price pressures to trigger rate
hikes next year, first in Romania and then in Poland. 
    Polish government bond yields dropped by a few basis points,
tracking euro zone debt yields, with the 10-year paper trading
at 3.43 percent.
    The corresponding yield in Hungary, where the central bank
(NBH) is still easing monetary conditions, traded at 2.38
percent, down two basis points.
    Hungary's yield curve continued to flatten ahead of the
NBH's weekly FX swap tender. Yields are near record lows.
    "The classical carry trade is going on," one Budapest-based
trader said. "You get money (forint) at zero implied interest
rate from the central bank, and buy something, like 3-year
papers which provide you with steady half percent yield." 
    
               CEE MARKETS  SNAPSH   AT  1056 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.630  25.630   +0.00   5.37%
                                 0       5       %  
 Hungary                    311.00  310.86  -0.04%  -0.70%
 forint                         00      50          
 Polish zloty               4.2450  4.2449   +0.00   3.74%
                                                 %  
 Romanian leu               4.5930  4.5956   +0.06  -1.26%
                                                 %  
 Croatian                   7.5380  7.5315  -0.09%   0.23%
 kuna                                               
 Serbian                    118.47  118.65   +0.15   4.12%
 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                     1055.5  1051.6   +0.37   +14.5
                                 3       0       %      3%
 Budapest                   40011.  39762.   +0.63   +25.0
                                40      67       %      2%
 Warsaw                     2493.2  2494.5  -0.05%   +27.9
                                 1       2              9%
 Bucharest                  7735.0  7748.2  -0.17%   +9.17
                                 5       3               %
 Ljubljana                  788.98  791.09  -0.27%   +9.95
                                                         %
 Zagreb                     1828.2  1841.1  -0.70%  -8.35%
                                 1       2          
 Belgrade                   728.95  728.92   +0.00   +1.61
                                                 %       %
 Sofia                      674.86  675.28  -0.06%   +15.0
                                                        8%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                     0.39   0.069   +115b   +8bps
                                                ps  
   5-year                    0.724  -0.006   +109b   +1bps
                                                ps  
   10-year                   1.598   0.014   +126b   +4bps
                                                ps  
 Poland                                                   
   2-year                    1.615   0.001   +238b   +1bps
                                                ps  
   5-year                    2.662  -0.047   +303b   -3bps
                                                ps  
   10-year                   3.433  -0.044   +309b   -2bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.89    0.99    1.11       0
               IBOR=>                               
 Hungary               <BU    0.08    0.09    0.14       0
               BOR=>                                
 Poland                <WI    1.79    1.84    1.93    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting by Radu Marinas in Bucharest and Robert
Muller in Prague; editing by Emelia Sithole-Matarise)
  
 
 

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