March 27, 2019 / 2:55 PM / 4 months ago

CEE MARKETS-Forint sets 2-month low after dovish central bank hike

    * Hungarian central bank crushed bets for gradual rate
tightening
    * Bonds track continuing Bund, UST yield decline
    * Bucharest stocks buck fall in Europe, on new tax decree

 (Adds government bonds, surge of CD Projekt shares)
    By Sandor Peto
    BUDAPEST, March 27 (Reuters) - The forint extended its
losses, hitting a two-month low against the euro on Wednesday
after the Hungarian central bank (NBH) dropped its guidance for
gradual monetary tightening.
    The NBH, which has been regarded as the most dovish central
bank in the eastern wing of the European Union for most of this
decade, halted a nearly seven-year run of monetary easing by
raising its overnight deposit rate on Tuesday.
    It increased the rate by 10 basis points to -0.05 percent,
keeping its base rate on hold at a record-low 0.9 percent as
expected.
    But it surprised by saying that the hike was a one-off,
rather than the beginning of a gradual increase, as surging
wages had put upside pressure on inflation, while slowing growth
in the world and Europe have the opposite impact.
    There is no drastic inflation pressure in the economy, Prime
Minister Viktor Orban's nominee for NBH deputy governor, Mihaly
Patai, said on Wednesday, striking a similarly dovish tone.
  
    The forint, after its biggest daily drop for years
against the euro on Tuesday, pierced the 320 psychological line
on Wednesday.
    It traded at 320.23 at 1413 GMT, down half a percent on the
day, though it was off a 2-month low of 320.75.
    Other Central European currencies eased 0.1-0.2 percent
after European Central Bank President Mario Draghi said the bank
could further delay an interest rate hike as risk to growth were
on the rise.
    The comments pushed government debt yields further down in
the euro zone and Central Europe after a rally in the past
weeks.
    Hungarian bonds, one of the biggest gainers in that rally,
were on a roller-coaster as investors digested the NBH's shift
away from further tightening.
    The 10-year benchmark paper traded at a yield of
2.86 percent, up from a session-low of 2.83 percent, but down 7
basis points from Tuesday's fixing.
    It almost closed the gap with the corresponding Polish yield
 which dropped 4 basis points to 2.81 percent.     
    Bucharest's blue-chip stock index rose 0.8 percent
to 3-month highs after a much-awaited draft government decree
showed that a widely criticised new Romanian bank tax would be
lowered and de-linked from money market rates.
    Warsaw's blue-chip index was pushed into the
positive by an over 7-percent surge in the shares of video games
developer CD Projekt.
    It reported a fall in its 2018 net profit, but its stocks
were boosted by hopes that it may launch its much-awaited
"Cyberpunk 2077" game at the E3 fair in Los Angeles in June.

    
            CEE       SNAPSHOT   AT                         
            MARKETS             1513 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.8050   25.7550    -0.19%    -0.38%
 crown      >                                       
 Hungary    <EURHUF=  320.2300  318.7000    -0.48%    +0.27%
 forint     >                                       
 Polish     <EURPLN=    4.2958    4.2906    -0.12%    -0.14%
 zloty      >                                       
 Romanian   <EURRON=    4.7630    4.7525    -0.22%    -2.29%
 leu        >                                       
 Croatian   <EURHRK=    7.4280    7.4205    -0.10%    -0.24%
 kuna       >                                       
 Serbian    <EURRSD=  117.8500  117.9100    +0.05%    +0.38%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1078.73  1074.350    +0.41%    +9.34%
                                       0            
 Budapest             41560.56  41740.97    -0.43%    +6.19%
 Warsaw                2329.45   2324.91    +0.20%    +2.32%
 Bucharest             8104.99   8044.12    +0.76%    +9.77%
 Ljubljana  <.SBITOP    872.30    874.64    -0.27%    +8.46%
            >                                       
 Zagreb                1789.01   1791.68    -0.15%    +2.30%
 Belgrade   <.BELEX1    732.55    730.05    +0.34%    -3.83%
            5>                                      
 Sofia                  578.75    578.37    +0.07%    -2.64%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.8850   -0.0410   +249bps     +1bps
            R>                                      
   5-year   <CZ5YT=R    1.8120    0.0320   +229bps     +9bps
            R>                                      
   10-year  <CZ10YT=    1.8690    0.0120   +193bps     +6bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.7000    0.0190   +231bps     +7bps
            R>                                      
   5-year   <PL5YT=R    2.1930   -0.0220   +267bps     +4bps
            R>                                      
   10-year  <PL10YT=    2.8240   -0.0450   +289bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.13      2.18      2.17      2.02
            <PRIBOR=                                
            >                                       
 Hungary                  0.29      0.40      0.47      0.19
                                                    
 Poland                   1.75      1.75      1.75      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 (Additional reporting by Anna Koper in Warsaw
Editing by Gareth Jones)
  
 
 
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