October 13, 2017 / 12:20 PM / 5 days ago

CEE MARKETS-Rate-setter fails to talk down forint amid regional rally

    * Forint dips for some time on dovish rate setter comments
    * Forint, zloty at multi-week highs on ECB expectations,
U.S. data
    * Leu firms as ruling party settles government reshuffle
    * Romanian bonds buck rise on overheating worry-trader

 (Recasts with forint gains, Romanian markets)
    By Sandor Peto
    BUDAPEST, Oct 13 (Reuters) - The forint joined a rally in
Central European markets on Friday, shaking off dovish comments
from a Hungarian rate setter, due to expectations for an
extension of the European Central Bank's asset buying.
    Less monetary stimulus in the euro zone and the United
States would erode the relative attractiveness of Central
European assets.
    Hungarian central bank Deputy Governor Marton Nagy spurred
expectations for further monetary easing in dovish comments
which market players believe were aimed at stemming a rise of
the forint.
    Nagy told a conference that there was still room for
long-term Hungarian government debt yields to fall and that
downside inflation risks had increased.
   
    The forint sent the forint into a fall against the euro,
after it touched a 3-week high. 
    But its weakness prevailed only for a few hours. Lower than
expected U.S. inflation figures reinforced the strengthening of
Central European currencies and government bonds, curbing
expectations for Federal Reserve interest rate hikes.
    "The forint has firmed despite the comments as the Hungarian
prospects suggest stability and predictability ... while the
positive global impact dominates," one Budapest-based trader
said.
    The forint, trading at 308.25 against the euro at
1444 GMT, firmed 0.1 percent, in tandem with the Czech crown
. The zloty gained a third of a percent,
touching a one-month high.
    The leu also firmed, getting help from a meeting
held by Romania's ruling Social Democrats late on Thursday. It
endorsed a proposed government reshuffle, which had been
weighing on Bucharest asset prices.
    Romanian government bonds, however, continued to
underperform, easing, while their Polish and Hungarian peers
rode the global tide.
    Romania's two-year bonds traded at yield of 2.3 percent, up
3 basis point on the day and about 90 basis points since the end
of August.
    Hungary's corresponding bonds traded near zero. 
    "The Romanian economy is showing the signs of overheating,
they are moving closer to central bank rate hikes," the trader
said.
    "In Hungary, meanwhile, if the central bank continues to
pump in money through its fx swaps on Monday, the 3-month
(interbank) BUBOR rate might head towards zero (from
0.03 percent, or lower."
    The trader added that a slipping of further parts of the
yield curve into the negative could encourage the buying of
longer-term government debt which still has positive yields.
    Hungary's 10-year benchmark bond yield dropped 8 basis
points on Friday, to 2.53 percent. Poland's corresponding yield
eased 7 basis points to 3.30 percent.
    
               CEE MARKETS  SNAPSH   AT  1644 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.836  25.868   +0.13   4.53%
                                 0       5       %  
 Hungary                    308.25  308.60   +0.12   0.18%
 forint                         00      50       %  
 Polish zloty               4.2530  4.2675   +0.34   3.55%
                                                 %  
 Romanian leu               4.5845  4.5890   +0.10  -1.08%
                                                 %  
 Croatian                   7.5100  7.5097   +0.00   0.60%
 kuna                                            %  
 Serbian                    119.40  119.36  -0.03%   3.31%
 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                     1053.0  1054.8  -0.17%   +14.2
                                 8       8              7%
 Budapest                   38919.  38772.   +0.38   +21.6
                                13      08       %      1%
 Warsaw                     2533.8  2537.6  -0.15%   +30.0
                                 3       9              8%
 Bucharest                  8040.5  7997.2   +0.54   +13.4
                                 4       2       %      9%
 Ljubljana                  816.75  813.57   +0.39   +13.8
                                                 %      2%
 Zagreb                     1862.4  1863.2  -0.04%  -6.64%
                                 8       9          
 Belgrade                   727.24  727.79  -0.08%   +1.38
                                                         %
 Sofia                      669.17  668.31   +0.13   +14.1
                                                 %      1%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                   -0.063  -0.149   +065b  -14bps
                                                ps  
   5-year                    0.439  -0.073   +074b   -5bps
                                                ps  
   10-year                   1.366  -0.006   +095b   +3bps
                                                ps  
 Poland                                                   
   2-year                    1.709  -0.013   +243b   +0bps
                                                ps  
   5-year                    2.659  -0.014   +296b   +1bps
                                                ps  
   10-year                   3.306  -0.061   +289b   -3bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.79    0.93    1.05       0
               IBOR=>                               
 Hungary               <BU    0.09    0.11    0.14    0.03
               BOR=>                                
 Poland                <WI   1.772   1.811   1.868    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting by Jason Hovet in Prague; Editing by
Robin Pomeroy)
  
 
 

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