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CEE MARKETS-Leu near six-week highs as Romanian central bank meets
October 3, 2017 / 9:51 AM / 2 months ago

CEE MARKETS-Leu near six-week highs as Romanian central bank meets

    * Czech 2-year yield above zero for first time since Aug
2016
    * Leu near 6-week high ahead of central bank meeting
    * Romania cbank seen holding main rate, deposit rate hike
possible

    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, Oct 3 (Reuters) - Expectations for some
monetary tightening in Central Europe helped the mid-yield on
the Czech two-year government bond rise above zero
on Tuesday for the first time in more than a year, while the
Romanian leu traded near six-week highs.
    After years in which interest rates trended downwards across
the region, policy divisions are starting to emerge, with a
rebound in inflation becoming a worry for central banks in the
Czech Republic and Romania.
    Romania's central bank is expected to keep its main interest
rate on hold at a record low 1.75 percent at its meeting on
Tuesday, but the bank's rhetoric could turn more hawkish.
    There are also some expectations that the bank could narrow
its standing facilities corridor by lifting the interest rate on
its deposit facility, which would amount to a policy tightening.
    ING analysts said in a note that any disappointment on that
front could weigh on the leu, which reached six-week
highs against the euro late on Monday and traded near that level
on Tuesday, at 4.5855 at 0859 GMT. 
    The currency has been buoyed by a rise in interbank interest
rates to their highest levels since late 2014 in recent days.
    Prime Minister Mihai Tudose criticised the central bank on
Friday for allowing the rise, but it continued this week. The
ask yield on the three-month interbank rate rose to
1.8 percent, exceeding the central bank's main rate. 
    "We look for the deposit facility hike at 7 November
meeting, after the 26 October ECB meeting, but given the recent
weakening pressure on the RON (leu), we attach a 30 percent
probability for NBR to frontload this decision," the ING
analysts said.
    Five out of eight analysts in a Reuters poll last month
projected a first hike in the Romanian central bank's main
interest rate by the end of the first quarter of 2018.  
    Among European Union countries, so far only the Czech
central bank has followed the U.S. Federal Reserve in hiking
borrowing costs, lifting its main rate in early August.
    Expectations for another hike in November have been buoying
Czech debt yields and helped the crown strengthen
above the 26 psychological line against the euro.
    It traded at 25.942 on Tuesday.
    "We are close (to 25.900) but we have bounced back already
three times so far but every time above 26.000," one dealer
said. "As we are below now and as long as we stay here for a few
days I think we can test that level but I don't think it'll be a
massive break."      
               CEE MARKETS  SNAPSH   AT  1059 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.942  25.927  -0.06%   4.11%
                                 0       5          
 Hungary                    311.70  312.24   +0.17  -0.92%
 forint                         00      00       %  
 Polish zloty               4.3110  4.3167   +0.13   2.15%
                                                 %  
 Romanian leu               4.5855  4.5849  -0.01%  -1.10%
 Croatian                   7.4985  7.4985   +0.00   0.75%
 kuna                                            %  
 Serbian                    119.11  119.16   +0.04   3.56%
 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                     1051.9  1050.7   +0.11   +14.1
                                 0       4       %      4%
 Budapest                   37853.  37751.   +0.27   +18.2
                                88      85       %      8%
 Warsaw                     2484.2  2469.5   +0.59   +27.5
                                 2       8       %      3%
 Bucharest                  7921.6  7894.2   +0.35   +11.8
                                 2       6       %      1%
 Ljubljana                  796.30  795.37   +0.12   +10.9
                                                 %      7%
 Zagreb                     1808.1  1807.5   +0.03  -9.36%
                                 1       3       %  
 Belgrade                   722.07  719.50   +0.36   +0.66
                                                 %       %
 Sofia                      686.76  687.75  -0.14%   +17.1
                                                        1%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.254  -0.028   +095b   -4bps
                                                ps  
   5-year                    0.372       0   +063b   -2bps
                                                ps  
   10-year                    1.35   0.022   +087b   -1bps
                                                ps  
 Poland                                                   
   2-year                    1.764   0.009   +246b   -1bps
                                                ps  
   5-year                    2.705   0.008   +297b   -1bps
                                                ps  
   10-year                   3.372   0.014   +289b   -2bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.72    0.88    1.02       0
               IBOR=>                               
 Hungary               <BU    0.08    0.11   0.155       0
               BOR=>                                
 Poland                <WI  1.7875    1.84    1.89    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting from Luiza Ilie and Radu Marinas in
Bucharest; Editing by Catherine Evans)
  
 
 

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