April 30, 2019 / 10:02 AM / 3 months ago

CEE MARKETS-Polish and German CPIs, euro rebound boost currencies, bond yields

    * Euro rebound helps CEE currencies, Polish CPI jumps
    * Forint trades near lows as central bank holds fire
    * Upside Polish, German CPI surprises fuel worry in Budapest
    * Hungarian, Polish government bond yields rise

 (Recasts with Hungarian central bank decisions, new comments,
rise in bond yields)
    By Sandor Peto
    BUDAPEST, April 30 (Reuters) - The forint failed to benefit
from weakness in the dollar and hovered near multi-month lows
against the euro as the National Bank of Hungary kept interest
rates and its rhetoric unchanged on Tuesday.
    The bank said inflation, which rose near the top of its 2-4
percent target range in March, could stay volatile, fuelled by
robust domestic demand but dampened by international economic
    Hungarian data was released on Tuesday, showing a 12.1
percent annual rise in gross wages underpinned domestic price
    But optimism that imported inflation could be low was not
underpinned by April data from Poland, Central Europe's biggest
economy, and Germany, a key trade partner for the region. 
    German inflation accelerated to 2.1 percent, above the
European Central bank's target. Polish inflation picked up much
more than expected, to 2.2 percent.   
    "It is likely that rising inflation on both core and
non-core components, together with ongoing fiscal stimulus, will
feed into a narrative of higher rates," Morgan Stanley analyst
Pasquale Diana said in a note.
    But Diana said he would continue to downplay this narrative
"as we just do not see a majority on the NBP (National Bank of
Poland) for a rate hike to happen on our forecast horizon".
    The zloty still firmed 0.1 percent to 4.2872
versus the euro.
    The crown firmed by 0.15 percent to 25.653.
    It was helped by a selling of the dollar, a rebound
of the euro from last week's 2-year lows versus the greenback,
and expectations that the Czech National Bank could raise its
main interest rate to 2 percent on Thursday, ending a recent
pause in a two-year tightening cycle.
    The forint, however, set a 3-and-a-half-month low versus the
crown and traded near multi-month lows versus the
euro and near a 2-year low against the dollar. 
    "The worry is that inflation could rise even further," one
Budapest-based dealer said, adding that the NBH was unlikely to
act any time soon to stop the rise.    
    Takarekbank analysts said in a note that a slow and gradual
tightening in interbank forint liquidity and some rise in the
NBH's overnight deposit rate of -0.05 percent remained on the
    Hungary's 10-year government bond yield rose 5 basis points
to 3.28 percent and Poland's corresponding yield
increased 6 basis points to 2.9875 percent.
    "Analysts can be wrong about inflation: German and Polish
figures came in higher than expected, and now the fear is that
Hungary may repeat that," one fixed income trader said. "The NBH
is behind the curve."
            CEE       SNAPSHOT   AT                         
            MARKETS             1529 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6530   25.6920    +0.15%    +0.21%
 crown      >                                       
 Hungary    <EURHUF=  323.3500  323.4400    +0.03%    -0.70%
 forint     >                                       
 Polish     <EURPLN=    4.2872    4.2925    +0.12%    +0.06%
 zloty      >                                       
 Romanian   <EURRON=    4.7589    4.7560    -0.06%    -2.20%
 leu        >                                       
 Croatian   <EURHRK=    7.4140    7.4163    +0.03%    -0.05%
 kuna       >                                       
 Serbian    <EURRSD=  118.0000  117.9550    -0.04%    +0.25%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1073.38  1070.230    +0.29%    +8.80%
 Budapest             42525.09  42469.84    +0.13%    +8.65%
 Warsaw                2329.41   2368.08    -1.63%    +2.32%
 Bucharest             8417.72   8416.03    +0.02%   +14.00%
 Ljubljana  <.SBITOP    887.95    884.69    +0.37%   +10.41%
 Zagreb                1836.43   1828.51    +0.43%    +5.01%
 Belgrade   <.BELEX1    744.04    746.26    -0.30%    -2.32%
 Sofia                  576.36    573.77    +0.45%    -3.04%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.6220   -0.1570   +221bps    -17bps
   5-year   <CZ5YT=R    1.7750    0.0250   +216bps     -1bps
   10-year  <CZ10YT=    1.8820    0.0130   +184bps     -3bps
   2-year   <PL2YT=R    1.6920    0.0600   +228bps     +5bps
   5-year   <PL5YT=R    2.3370    0.0690   +273bps     +4bps
   10-year  <PL10YT=    3.0100    0.0610   +296bps     +2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.25      2.26      2.26      2.04
 Hungary                  0.33      0.48      0.68      0.16
 Poland                   1.76      1.78      1.82      1.72
 Note: FRA  are for ask prices                              
 (Additional reporting by Marcin Goclowski in Warsaw, Editing by
William Maclean and Ed Osmond)
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