December 18, 2018 / 10:52 AM / 3 months ago

CORRECTED-CEE MARKETS-Currencies weaken, Hungarian central bank seen holding fire

 (Corrects par 5 to November inflation not December)
    * Hungarian central bank is expected to keep rates at record
lows
    * Hungarian 10-year bond spread over Poland widens further
    * Kuna sets December low after central bank intervention

    By Sandor Peto
    BUDAPEST, Dec 18 (Reuters) - Central European currencies
eased before a meeting of the Hungarian central bank that's
expected to keep its benchmark interest rate at a record-low 0.9
percent.
    Many investors expect the Federal Reserve to signal an
economic slowdown at its Dec. 18-19 meeting, but Tuesday's
Polish data showed continued fast growth in wages were not
expected to lead to a more hawkish monetary policy stance in
Warsaw, either. 
    Central European currencies including the forint
and the zloty slipped against the euro, falling less
than 0.1 percent by 0948 GMT in slow trade.
    Some analysts have said the Hungarian central bank may
provide markets with some clues about a slow monetary tightening
next year.
    A bigger-than-expected retreat in annual headline inflation
to 3.1 percent in November has reduced the likelihood of hawkish
comments from the meeting, dealers said.
    A fixed income trader said rate setters "can sit back" after
a decline in crude prices in the fourth quarter.
    "I do not think that they will issue any hawkish comment,"
the trader said.
    Hungarian government bond yields as well as yields in
interest rate swaps and forward rate agreements extended
Monday's rebound after a sharp decline in recent months.
    The yield of the 10-year government bond at 3.26 percent
offered the highest spread over the corresponding Polish yield
for over a month.
    The Polish 10-year yield, which had fallen less
in the past months, tracked a fall in Bunds and U.S. Treasuries,
and at 2.888 percent it set a new two-year low.
    The Czech 10-year yield, bid at 1.948 percent, was flat.
    A recent decline in Czech market yields has mis-priced the
magnitude of likely further central bank rate increases, Societe
Generale analysts said in a note.
    The bank could keep rates on hold at its meeting on
Thursday, but its "statement might be more hawkish than the
market currently expects given the relatively weak CZK (crown)
and ever strengthening demand pressures to inflation," they
said.
    The kuna traded at its weakest levels this month,
at 7.405 versus the euro, off last week's five-month highs. 
Croatia's central bank bought 458 million euros on Monday in its
second big market intervention in December.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1048 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7810   25.7680    -0.05%    -0.93%
 crown      >                                       
 Hungary    <EURHUF=  323.4200  323.2500    -0.05%    -3.87%
 forint     >                                       
 Polish     <EURPLN=    4.2849    4.2820    -0.07%    -2.53%
 zloty      >                                       
 Romanian   <EURRON=    4.6500    4.6480    -0.04%    +0.64%
 leu        >                                       
 Croatian   <EURHRK=    7.4050    7.4035    -0.02%    +0.34%
 kuna       >                                       
 Serbian    <EURRSD=  118.4400  118.3800    -0.05%    +0.05%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1021.98  1027.870    -0.57%    -5.21%
                                       0            
 Budapest             39553.54  39675.76    -0.31%    +0.45%
 Warsaw                2289.34   2281.87    +0.33%    -6.98%
 Bucharest             8412.99   8524.69    -1.31%    +8.50%
 Ljubljana  <.SBITOP    794.57    793.86    +0.09%    -1.46%
            >                                       
 Zagreb                1743.16   1744.58    -0.08%    -5.41%
 Belgrade   <.BELEX1    749.01    746.93    +0.28%    -1.42%
            5>                                      
 Sofia                  588.09    591.24    -0.53%   -13.19%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6340    0.0200   +225bps     +3bps
            R>                                      
   5-year   <CZ5YT=R    1.7930   -0.0020   +208bps     +2bps
            R>                                      
   10-year  <CZ10YT=    1.9480    0.0000   +172bps     +2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.3770   -0.0370   +199bps     -3bps
            R>                                      
   5-year   <PL5YT=R    2.3170   -0.0580   +260bps     -4bps
            R>                                      
   10-year  <PL10YT=    2.8960   -0.0330   +266bps     -1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.18      2.27      2.34      2.02
            <PRIBOR=                                
            >                                       
 Hungary                  0.29      0.50      0.78      0.13
                                                    
 Poland                   1.75      1.77      1.79      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 (Reporting by Sandor Peto, editing by Larry King)
  
 
 
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