May 9, 2019 / 2:20 PM / 2 months ago

CEE MARKETS-Forint, Hungarian bonds rebound, with no scare over CPI rise

    * No surprise about Hungary's CPI rise to seven-year high
    * Forint rebounds from levels near 5-month low vs euro
    * Hungarian central bank says tax-adjusted core CPI even
    * Hungarian bond auction draws robust demand, yields retreat
    * Serbian central bank keeps rates on hold as expected

 (Adds Hungarian gov't bond auctions, Serbian cenbank decision)
    By Sandor Peto
    BUDAPEST, May 9 (Reuters) - The forint and Hungarian
government bonds firmed on Thursday as investors closed selling
positions after April data did nothing to faze investors about
inflation and monetary policy.
    The forint initially weakened near 5-month lows
against the euro after the Central Statistics Office reported a
rise in annual headline inflation to a seven-year high of 3.9
    But after reaching 324.75, it reversed the fall and firmed
to 323.5 by 1318 GMT, up 0.2 percent from Wednesday.
    Earlier fears of an inflation jump causing damage to the
National Bank of Hungary's credibility dissipated as inflation 
did not reach the top of the bank's 2-4 percent target range.
    Also helping sentiment was the bank reporting that its main
inflation gauge, core inflation adjusted for the effects of tax
changes, dropped to 3.4 percent from 3.5 percent in March,
market participants said. 
     Strong demand at the government's bi-weekly government bond
sale also indicated an easing of jitters which had pushed
Hungarian yields higher in the past days, while Polish yields
tracked Bunds lower, dealers said.
    "The positive news is that the figures were not worse... and
this makes those who had expected worse close short positions,"
one fixed income trader said.
    The government sold 104 billion forints ($360.46
million)worth of bonds at the auctions
, 39 billion forints more than
originally offered.
    Yields were higher from a sale two weeks ago, but below
secondary market levels, and dropped even further after the
auctions. The 5-year paper traded at 2.22 percent, 8 basis
points down from late Wednesday levels, the trader said.
    Worries may return if inflation continues to rise, analysts
said. But the NBH has signalled that it would decide on policy
changes when it discusses its quarterly inflation reports, and
the next report is due in June.
    Most other Central European currencies eased as fears that
Chinese-U.S. trade talks might collapse weighed on emerging
market assets and global equities markets.
    Warsaw's blue-chip equities index fell 0.7 percent
to its lowest since November. The dinar resisted the
pressure, bid at 117.84, up 0.15 percent.
    The Serbian central bank kept its benchmark rate unchanged
as expected at 3 percent as the dinar remains strong, growth is
stable and inflation within the bank's target range.

    The bank has sold the dinar in the market in the past months
to stem its gains fuelled by the spending of Serbs working
abroad and by dinar-denominated government debt sales.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1518 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7300   25.7180    -0.05%    -0.09%
 crown      >                                       
 Hungary    <EURHUF=  323.5000  324.0500    +0.17%    -0.75%
 forint     >                                       
 Polish     <EURPLN=    4.2965    4.2925    -0.09%    -0.16%
 zloty      >                                       
 Romanian   <EURRON=    4.7615    4.7565    -0.11%    -2.26%
 leu        >                                       
 Croatian   <EURHRK=    7.4090    7.4090    +0.00%    +0.01%
 kuna       >                                       
 Serbian    <EURRSD=  117.8400  118.0200    +0.15%    +0.39%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1059.80  1063.500    -0.35%    +7.42%
 Budapest             41138.44  41350.33    -0.51%    +5.11%
 Warsaw                2206.68   2221.82    -0.68%    -3.07%
 Bucharest             8310.32   8370.72    -0.72%   +12.55%
 Ljubljana  <.SBITOP    865.12    875.28    -1.16%    +7.57%
 Zagreb                1847.59   1839.23    +0.45%    +5.65%
 Belgrade   <.BELEX1    733.61    735.03    -0.19%    -3.69%
 Sofia                  567.02    566.97    +0.01%    -4.62%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.6240   -0.1540   +226bps    -14bps
   5-year   <CZ5YT=R    1.7300   -0.0120   +221bps     +1bps
   10-year  <CZ10YT=    1.8770    0.0100   +194bps     +3bps
   2-year   <PL2YT=R    1.6730   -0.0050   +231bps     +1bps
   5-year   <PL5YT=R    2.3020   -0.0100   +279bps     +1bps
   10-year  <PL10YT=    2.9540    0.0010   +302bps     +2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.26      2.27      2.27      2.21
 Hungary                  0.36      0.52      0.70      0.16
 Poland                   1.75      1.75      1.78      1.72
 Note: FRA  are for ask prices                              
 ($1 = 288.5200 forints)

 (Reporting by Sandor Peto
Editing by Mark Heinrich)
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