May 9, 2019 / 9:30 AM / 2 months ago

CEE MARKETS-Forint weakens, but CPI rise unlikely to cause rates to go

    * Hungary's CPI rise to seven-year high causes no surprise
    * Forint weakens, but stops short of five-month lows
    * Hungarian central bank says tax-adjusted core CPI even
drops
    * Bids return for Hungarian bonds ahead of auction -trader

    By Sandor Peto
    BUDAPEST, May 9 (Reuters) - The forint led declines by
Central European currencies on Thursday after Hungary reported
April's inflation rate reached  a seven-year-high of 3.9
percent.
    Accelerating inflation can help currencies by raising
expectations that interest rates will go up, but the National
Bank of Hungary is unlikely to react to the April figures,
analysts and dealers said.
    The increase was below expectations, although still near the
central bank's 2 to 4 percent target range. The bank said its
main inflation gauge, core inflation adjusted for the effects of
tax changes, dropped to 3.4 percent from 3.5 percent in March.
  
    It also said earlier that it would decide on policy changes
when it discusses its quarterly inflation reports. The next
report is due in June.
    The forint slipped 0.2 percent against the euro by
0813 GMT. The Czech crown, the zloty and the
leu all shed 0.1 percent.
    The yield in five-year forint interest rate swaps dropped to
1.62 percent from 1.68 percent after the figures, a further
indications that rate increases are unlikely for now.
    Hungary's 10-year bonds traded at a yield of 3.33 percent
early in the session. Poland's corresponding yield
was steady at 2.9315 percent.
    "Bids have returned ... In the past two or three days we did
not see buyers, but now we can expect a normal or strong
(bi-weekly Hungarian government bond) auction (later on
Thursday)," the trader said.
    Emerging market currencies and global stock markets were
also weighed down by worries that trade talks won't keep the
United States from raising tariffs on Chinese goods,
intensifying a trade war between the two countries.
    Warsaw's blue-chip equities index fell 0.7 percent
to its lowest since November.
    In Central Europe's currency markets, only the Serbian dinar
 resisted the pressure, bid at 117.9, near the high end
of its 90-day moving average at 118.
    The Serbian central bank is expected to leave its benchmark
rate at 3 percent when it meets on Thursday. It has been buying
dinars in the market this year to keep it from strengthening.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1013 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7350   25.7180    -0.07%    -0.11%
 crown      >                                       
 Hungary    <EURHUF=  324.7000  324.0500    -0.20%    -1.11%
 forint     >                                       
 Polish     <EURPLN=    4.2982    4.2925    -0.13%    -0.20%
 zloty      >                                       
 Romanian   <EURRON=    4.7600    4.7565    -0.07%    -2.23%
 leu        >                                       
 Croatian   <EURHRK=    7.4100    7.4090    -0.01%    +0.00%
 kuna       >                                       
 Serbian    <EURRSD=  117.9000  118.0200    +0.10%    +0.34%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1063.01  1063.500    -0.05%    +7.75%
                                       0            
 Budapest             41132.94  41350.33    -0.53%    +5.09%
 Warsaw                2206.11   2221.82    -0.71%    -3.10%
 Bucharest             8301.38   8370.72    -0.83%   +12.43%
 Ljubljana  <.SBITOP    867.86    875.28    -0.85%    +7.91%
            >                                       
 Zagreb                1840.58   1839.23    +0.07%    +5.25%
 Belgrade   <.BELEX1    733.48    735.03    -0.21%    -3.70%
            5>                                      
 Sofia                  567.30    566.97    +0.06%    -4.57%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6240   -0.1540   +225bps    -15bps
            R>                                      
   5-year   <CZ5YT=R    1.7490    0.0070   +223bps     +2bps
            R>                                      
   10-year  <CZ10YT=    1.8730    0.0060   +194bps     +3bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6700   -0.0080   +230bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.3010   -0.0110   +278bps     +0bps
            R>                                      
   10-year  <PL10YT=    2.9510   -0.0020   +301bps     +2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.25      2.25      2.26      2.21
            <PRIBOR=                                
            >                                       
 Hungary                  0.37      0.53      0.71      0.16
                                                    
 Poland                   1.74      1.75      1.79      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto, editing by Larry King)
  
 
 
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