January 8, 2018 / 3:11 PM / 2 months ago

CEE MARKETS-Leu jumps as Romanian central bank hikes rates

    * Romanian central bank raises rates, surprising some
    * Romanian government bond yields mostly rise
    * Zloty eases, central bank unlikely to encourage rate hike

 (Recasts with Romanian central bank interest rate hike)
    By Sandor Peto and Luiza Ilie
    BUDAPEST/BUCHAREST, Jan 8 (Reuters) - The leu firmed and
Romanian government bond yields rose as the country's central
bank (NBR) delivered its first benchmark interest rate hike in a
decade on Monday to fight inflation.
    The quarter percentage point hike to 2 percent made the NBR
the second central bank among those of the European Union's
eastern nations to start to lift rates from record low levels,
after two hikes by the Czech central bank (CNB) since August. 
    While the CNB has the lowest inflation target in the region
at 2 percent, markets have been gripped by overheating concerns
in Romania where a surge in wages has helped the economy to grow
by a stellar annual 8.8 percent in the third quarter of 2017.
    Between August and November, Romania's annual inflation rate
surged two percentage points to 3.2 percent.
    In a Reuters poll, five analysts had expected the bank to
hold fire, while four projected a quarter point hike. 
    Some Romanian government debt prices eased, with 3-year
papers bid at a yield of 3.45 percent, up 13 basis points
according to Reuters data.
    The leu jumped more than a third of a percent
against the euro past 4.62 after the decision.
    It gave up almost all of the gains to trade at 4.6335 at
1418 GMT, after NBR Governor Mugur Isarescu said the bank would
consider the 5-6 percentage point range for leu moves as
    The Polish central bank (NBP) is unlikely to follow the
Czech and Romanian central bank rate hikes any time soon, after
Polish figures for December showed lower-than-expected
    It is unlikely to encourage expectations for interest rate
hikes at its meeting on Wednesday, and that could weigh on the
zloty which hit six-and-a-half-year highs against the
euro last week.
    It eased 0.3 percent to 4.1672 by 1418 GMT. 
    The region's currencies generally started the year
strengthening, lifted by a rise in risk appetite in global
markets and the prospect of healthy economic growth in Central
    "The zloty will probably not be helped by comments after the
MPC (central bank) meeting," ING analysts said in a note, adding
that a correction could weaken the zloty to 4.2 in the next
couple of weeks, even though a big easing is unlikely.
    Erste analysts said in a note that they did not expect
anything new from the NBP, and the zloty could stay flat.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1518 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.5380   25.5485    +0.04%    +0.02%
 crown      >                                       
 Hungary    <EURHUF=  308.9000  308.5050    -0.13%    +0.65%
 forint     >                                       
 Polish     <EURPLN=    4.1672    4.1552    -0.29%    +0.22%
 zloty      >                                       
 Romanian   <EURRON=    4.6335    4.6367    +0.07%    +1.00%
 leu        >                                       
 Croatian   <EURHRK=    7.4400    7.4375    -0.03%    -0.13%
 kuna       >                                       
 Serbian    <EURRSD=  118.4500  118.7400    +0.24%    +0.04%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1107.45  1105.320    +0.19%    +2.72%
 Budapest             40052.37  39995.16    +0.14%    +1.71%
 Warsaw                2536.35   2529.55    +0.27%    +3.05%
 Bucharest             7953.17   7985.82    -0.41%    +2.57%
 Ljubljana  <.SBITOP    807.89    802.25    +0.70%    +0.19%
 Zagreb                1862.71   1849.71    +0.70%    +1.08%
 Belgrade   <.BELEX1    767.70    753.03    +1.95%    +1.04%
 Sofia                  687.68    692.24    -0.66%    +1.51%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    0.6980    0.0870   +132bps    +10bps
   5-year   <CZ5YT=R    0.9410    0.0460   +117bps     +7bps
   10-year  <CZ10YT=    1.7050    0.0580   +129bps     +9bps
   2-year   <PL2YT=R    1.6130    0.0060   +224bps     +2bps
   5-year   <PL5YT=R    2.4990    0.0040   +273bps     +2bps
   10-year  <PL10YT=    3.2280    0.0040   +282bps     +3bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                1.05      1.22      1.36      0.00
 Hungary                  0.07      0.10      0.15      0.03
 Poland                   1.75      1.78      1.87      1.72
 Note: FRA  are for ask prices                              
 (Additional reporting by Marcin Goclowski in Warsaw; Editing by
Keith Weir and Peter Graff)
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