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Luiza Ilie

CEE MARKETS-Romanian assets ease on tax worries, central bank warning

08 Jan 2019

* Leu eases after weak German data * Romanian central bank holds fire, warns over tax package * Romanian equity index declines, bucking European rise (Recasts with Romanian central bank decision and comments, analyst quotes) By Sandor Peto and Luiza Ilie BUDAPEST/BUCHAREST, Jan 8 Romanian assets fell on Tuesday amid worries over a package of government measures to boost revenues, with the central bank saying they created uncertainty in the economy. The leu shed 0.2 percent against the euro to 4.6695 by 1439 GMT. It fell in tandem with the region's main currencies and tracked a decline by the euro, after November industrial output data showed a decline in Germany, Central Europe's main export market, and a slowdown in Czech and Hungarian growth. But Romanian shares did not follow a rebound in European and regional markets, as hopes of a possible trade deal between China and the United States offset worries over global growth. The Bucharest exchange's blue-chip index fell 1.7 percent. Budapest and Prague each gained about half a percent. In recent days, Romanian stocks regained some of the losses they suffered in December. Stocks fell after the government announced taxes that hit banks and energy, among others, and changes in pension rules that could weaken domestic demand for equities and government debt. The worries resurfaced by Tuesday, before the Romanian central bank's meeting. The bank kept interest rates on hold, as expected -- inflation has slowed in recent months and the economy is expected to slow. The bank's governor, Mugur Isarescu, said after the meeting that inflation may fall further, but risks are amplified by fiscal policy, and that the measures -- which included a tax on bank assets linked to interbank interest rates -- hurt monetary policy flexibility, if not independence. He said the bank had trouble understanding part of the measures and would seek a meeting with the finance minister. "A key question in 2019 is how the NBR would respond to potential weakening pressure on the leu coming from twin (budget and current account) deficits and exacerbated by government’s preference for low interest rates," said Erste Group analyst Eugen Sinca in a note. "We continue to favor the scenario of a modest depreciation of the leu (2-3 percent), with the exchange rate potentially playing the role of a relief valve..." he said. CEE SNAPSHOT AT MARKETS 1539 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.6380 25.5750 -0.25% +0.27% crown > Hungary <EURHUF= 321.7000 321.2000 -0.16% -0.19% forint > Polish <EURPLN= 4.2992 4.2960 -0.07% -0.22% zloty > Romanian <EURRON= 4.6695 4.6600 -0.20% -0.33% leu > Croatian <EURHRK= 7.4330 7.4255 -0.10% -0.31% kuna > Serbian <EURRSD= 118.3000 118.3500 +0.04% +0.00% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1013.99 1008.560 +0.54% +2.78% 0 Budapest 40737.92 40569.47 +0.42% +4.09% Warsaw 2326.47 2331.45 -0.21% +2.19% Bucharest 7554.26 7683.07 -1.68% +2.31% Ljubljana <.SBITOP 806.41 802.32 +0.51% +0.27% > Zagreb 1738.76 1726.78 +0.69% -0.57% Belgrade <.BELEX1 718.24 731.79 -1.85% -5.70% 5> Sofia 575.70 577.15 -0.25% -3.16% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.6910 0.0620 +227bps +5bps R> 5-year <CZ5YT=R 1.7470 0.0140 +203bps +0bps R> 10-year <CZ10YT= 1.8240 0.0390 +159bps +2bps RR> Poland 2-year <PL2YT=R 1.4510 -0.0290 +203bps -4bps R> 5-year <PL5YT=R 2.3010 0.0190 +259bps +1bps R> 10-year <PL10YT= 2.8430 0.0490 +261bps +3bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.09 2.19 2.21 2.01 <PRIBOR= > Hungary 0.30 0.54 0.79 0.13 Poland 1.74 1.75 1.77 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Reporting by Sandor Peto, editing by Larry King)

CEE MARKETS-Currencies ease, central banks seen holding fire

08 Jan 2019

* Romanian, Polish central banks seen keeping rates unchanged * Political pressure on Polish central bank chief weighs on zloty * Czech, Hungarian industrial output figures show slowdown By Sandor Peto and Luiza Ilie BUDAPEST/BUCHAREST, Jan 8 Central European currencies weakened on Tuesday before central bank meetings that are unlikely to raise interest rates and after Czech and Hungarian industrial output data showed slowing growth. Romania's central bank, sitting on Tuesday, is expected to keep its 2.5 percent benchmark rate on hold. So is the Polish central bank, which meets on Wednesday. Monday for Polish zloty was hit by political pressure on Polish central bank Governor Adam Glapinski over the pay of one of his main aides. The tension follows a corruption scandal last year that forced the head of financial market regulation, a protege of Glapinski, out of his job in November. "Under the circumstances, it is not surprising that the risk premium on the zloty should rise," Commerzbank analysts said in a note. The zloty eased 0.1 percent versus the euro to 4.3 by 0929 GMT, in line with the forint and the leu. The Czech crown, buoyed recently by expectations for the Czech central bank would continue to raise interest rates, shed a quarter of a percent, to trade at 25.636, still near three-and-a-half-month highs. According to data released on Tuesday, Czech and Hungarian industrial output growth slowed in November, reflecting an unexpected fall in output in Germany, the region's biggest export market. Central European government bond yields continued to edge higher after falling last month, tracking German equivalents. Romania's 10-year yield was bid higher by 3 basis points at 4.64 percent. The Romanian central bank is widely expected to keep interest rates on hold on Tuesday. A package of tax increases begun in December to address budget problems continues to weigh on sentiment. Comments of central bank Governor Mugur Isarescu on the measures at the bank's news conference will be closely watched. His comments on commercial banks' minimum reserve requirements will be also scrutinized. He had earlier suggested that a cut was likely should a liquidity shortage in leu markets become a fixture, ING analyst Ciprian Dascalu said in a note. CEE SNAPSHOT AT MARKETS 1029 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.6360 25.5750 -0.24% +0.28% crown > Hungary <EURHUF= 321.4000 321.2000 -0.06% -0.10% forint > Polish <EURPLN= 4.3000 4.2960 -0.09% -0.24% zloty > Romanian <EURRON= 4.6640 4.6600 -0.09% -0.21% leu > Croatian <EURHRK= 7.4260 7.4255 -0.01% -0.22% kuna > Serbian <EURRSD= 118.2300 118.3500 +0.10% +0.06% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1009.06 1008.560 +0.05% +2.28% 0 Budapest 40535.42 40569.47 -0.08% +3.57% Warsaw 2322.17 2331.45 -0.40% +2.00% Bucharest 7697.94 7683.07 +0.19% +4.26% Ljubljana <.SBITOP 803.54 802.32 +0.15% -0.09% > Zagreb 1737.93 1726.78 +0.65% -0.62% Belgrade <.BELEX1 727.65 731.79 -0.57% -4.47% 5> Sofia 574.57 577.15 -0.45% -3.35% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.8460 0.2170 +242bps +20bps R> 5-year <CZ5YT=R 1.7900 0.0580 +207bps +4bps R> 10-year <CZ10YT= 1.8380 0.0530 +160bps +3bps RR> Poland 2-year <PL2YT=R 1.4730 -0.0070 +205bps -2bps R> 5-year <PL5YT=R 2.3050 0.0230 +258bps +0bps R> 10-year <PL10YT= 2.8410 0.0470 +260bps +2bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.09 2.19 2.21 2.01 <PRIBOR= > Hungary 0.31 0.55 0.80 0.13 Poland 1.74 1.75 1.77 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Reporting by Sandor Peto, editing by Larry King)

CEE MARKETS-Romanian stocks extend plunge as government prepares tax measures

21 Dec 2018

* Romanian government to meet to approve shock tax measures * Bucharest index shed 18 pct in just four days * Romanian bonds mixed, leu weakens by 1/4 pct * Global growth fears weigh on CEE stocks, currencies By Sandor Peto and Luiza Ilie BUDAPEST/BUCHAREST, Dec 21 Romanian stocks headed towards their worst weekly performance in more than seven years as the government was expected to approve tax measures later on Friday affecting various business sectors. The Bucharest bourse's index fell 2.3 percent to its lowest level in almost two years, while other Central European indices dropped much less, with fears over global economic growth weighing on sentiment in emerging markets. Just four days ago, the Bucharest index was Central Europe's best 2018 performer, with over 10 percent year-to-date gain, and by Friday it became one of the worst, down 7.5 percent from the end of 2017. The Romanian government will meet at 1630 GMT to approve shock measures announced late on Tuesday to keep the budget deficit at bay, and the details will be closely watched in markets. The emergency decree will enforce a bank tax but also cap gas prices, introduce a turnover tax for energy and telecoms firms, and enable Romanians to withdraw from a mandatory private pension scheme. Tremors ran through regional markets, hitting the shares of banks including Austrian-based Erste and Raiffeisen and Hungary's OTP. The main driver of Friday's index decline was local lender Banca Transilvania. State-owned nuclear power producer Nuclearelectrica's stocks fell as much as 18 percent. "All in all, the desperate fiscal measures are clouding business prospects," Citigroup said in its weekly note on emerging markets. It said dampened credit lending could offset the additional inflation pressure from higher taxes in the energy, telecom and tobacco sectors. Romanian government bond yields, which jumped after the announcement, but retreated by Thursday, were mixed on Friday. The leu has also seen jitters due to increased uncertainty over the policy of the Romanian central bank, which has become more optimistic over inflation in the past months after earlier interest rate hikes. After getting help from demand due to end-of-month tax payments on Thursday, it shed a quarter of a percent against the euro on Friday to trade at 4.652, near its 90-day moving average. Elsewhere in Central Europe, the Hungarian forint and the Czech crown shed 0.1 percent versus the euro. The zloty was also a shade weaker, shrugging off a bigger-than-expected 8.2 percent annual jump in Polish retail sales in November. CEE SNAPSHOT AT MARKETS 1055 CET CURRENCI ES Latest Previous Daily Change bid close change in 2018 Czech <EURCZK= 25.8180 25.7900 -0.11% -1.07% crown > Hungary <EURHUF= 321.9000 321.6000 -0.09% -3.41% forint > Polish <EURPLN= 4.2885 4.2870 -0.03% -2.62% zloty > Romanian <EURRON= 4.6524 4.6410 -0.25% +0.59% leu > Croatian <EURHRK= 7.4205 7.4257 +0.07% +0.13% kuna > Serbian <EURRSD= 118.0900 118.2500 +0.14% +0.35% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2018 Prague 983.85 992.9200 -0.91% -8.75% Budapest 39409.80 39592.68 -0.46% +0.08% Warsaw 2287.84 2306.68 -0.82% -7.04% Bucharest 7169.24 7332.71 -2.23% -7.54% Ljubljana <.SBITOP 788.59 791.09 -0.32% -2.21% > Zagreb 1729.38 1729.87 -0.03% -6.16% Belgrade <.BELEX1 751.17 750.98 +0.03% -1.14% 5> Sofia 587.74 588.81 -0.18% -13.24% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.6770 0.1240 +228bps +13bps R> 5-year <CZ5YT=R 1.8850 0.0670 +214bps +6bps R> 10-year <CZ10YT= 2.0460 0.0100 +180bps +0bps RR> Poland 2-year <PL2YT=R 1.3680 0.0030 +197bps +1bps R> 5-year <PL5YT=R 2.3380 0.0040 +259bps -1bps R> 10-year <PL10YT= 2.8950 0.0290 +265bps +2bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.15 2.20 2.27 2.02 <PRIBOR= > Hungary 0.32 0.59 0.83 0.00 Poland 1.76 1.77 1.79 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Reporting by Sandor Peto; Editing by Kevin Liffey)

Romanian shares equal worst day on record after bank tax surprise

19 Dec 2018

BUCHAREST/BUDAPEST Romania's stock market plunged 12 percent toward its worst day on record on Wednesday after the country's government announced shock plans to tax banking assets and cap gas prices.

Female film directors and producers shine in Romanian New Wave

03 Dec 2018

BUCHAREST Starting out as a unit production manager in Romania's film industry more than two decades ago, Ada Solomon felt she needed to punch above her weight.

CEE MARKETS-High bond yields drop, Romanian central bank sees CPI fall

06 Nov 2018

* Romanian central bank keeps rates on hold, sees CPI decline * Romanian, Hungarian bonds extend rally on liquid markets * Currencies ease slightly ahead of U.S. midterm election, Fed * Hungarian bonds yields also drop, Polish bonds flat (Adds comments from Romanian central bank, analysts) By Sandor Peto and Luiza Ilie BUDAPEST/BUCHAREST, Nov 6 Romanian and Hungarian government bond yields fell on Tuesday, bucking a rise across the European Union as the two country's central banks kept local markets awash in money. The Romanian bank (NBR) kept its 2.5 percent benchmark interest rates on hold as expected, and confirmed that it saw inflation falling towards the top of its 1.5-3.5 percent target range by the end of the year. The bank, like its Czech peer, has increased interest rates to fight inflation which runs around 5 percent, and after its last hike in May mostly kept liquidity in domestic markets tight. But it injected over 16 billion lei into markets through an auction last week, and a further 12 billion lei on Monday. That helped leu-denominated government bonds become an attractive buy, after a surge in U.S. Treasury yields a month ago also boosted yields in many emerging markets including Romania and Hungary. Romanian bond yields set multi-week lows on Tuesday, and the 10-year yield traded near its lowest levels in six months, around 4.7 percent. Inflation may decline slower than the NBR expects and the bank could continue monetary tightening in 2019, Erste Group analyst Eugen Sinca said in a note. "Once the ECB begins to contemplate rate hikes, the external environment will begin to play a greater role in the decisions taken by the NBR," he added. Central European currencies, including the leu, mostly eased slightly as investors held their breath ahead of Tuesday's midterm elections in the United States and the Federal Reserve's two-day meeting from Wednesday. Hungarian bond yields were fixed lower, with the 10-year yield dropping 9 basis points to 3.55 percent, after touching its lowest level in two months at 3.52 percent. Like Romanian peers, Hungarian yields have been falling since U.S. Treasury yields peaked last month. "The NBH (National Bank of Hungary) still maintains abundant liquidity in markets with its swaps," one Budapest-based fixed income trader said. "Yields here (and Romania) have been higher (than elsewhere in Europe) and some foreign investors have fallen in love with Hungarian bonds again," the trader added. Foreigners' forint-denominated government bond holding has reached a 3-year high of almost 4 trillion forints . Polish yields, which are usually more stable and more willing to track German Bunds, were flat. The 10-year yield there, trading at 3.17 percent, has declined by only 15 basis points from its October peak, compared with almost 40 basis points shed by its Hungarian and Romanian peers. The Polish central bank is also expected to keep its interest rates on hold on Wednesday. "But if the (Monetary) Council will say that they are planning a rate hike in 2019, that would surprise the markets," said Mateusz Milewski, a dealer at mBank. CEE SNAPSHOT AT MARKETS 1617 CET CURRENCI ES Latest Previous Daily Change bid close change in 2018 Czech <EURCZK= 25.8500 25.8120 -0.15% -1.19% crown > Hungary <EURHUF= 322.0500 322.0100 -0.01% -3.46% forint > Polish <EURPLN= 4.3085 4.3084 -0.00% -3.07% zloty > Romanian <EURRON= 4.6630 4.6610 -0.04% +0.36% leu > Croatian <EURHRK= 7.4375 7.4395 +0.03% -0.10% kuna > Serbian <EURRSD= 118.3900 118.3800 -0.01% +0.09% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2018 Prague 1073.36 1072.440 +0.09% -0.45% 0 Budapest 37680.11 37794.87 -0.30% -4.31% Warsaw 2227.93 2233.74 -0.26% -9.48% Bucharest 8607.89 8573.48 +0.40% +11.02% Ljubljana <.SBITOP 797.99 799.74 -0.22% -1.04% > Zagreb 1776.39 1771.45 +0.28% -3.61% Belgrade <.BELEX1 741.91 740.93 +0.13% -2.35% 5> Sofia 594.29 596.67 -0.40% -12.28% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.6660 0.1210 +231bps +12bps R> 5-year <CZ5YT=R 1.8550 0.0050 +203bps +0bps R> 10-year <CZ10YT= 2.1400 0.0090 +171bps +0bps RR> Poland 2-year <PL2YT=R 1.5410 -0.0100 +218bps -1bps R> 5-year <PL5YT=R 2.4410 0.0120 +261bps +1bps R> 10-year <PL10YT= 3.1910 0.0050 +276bps +0bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.05 2.20 2.35 1.97 <PRIBOR= > Hungary 0.33 0.59 0.94 0.16 Poland 1.77 1.80 1.87 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Alicja Ptak in Warsaw, Editing by Matthew Mpoke Bigg and Ed Osmond)

CEE MARKETS-Romanian bond yield sets 6-month low, central bank holds fire

06 Nov 2018

* Romanian central bank keeps rates on hold as expected * Romanian bonds extend rally, supported by repo auction * FX, stocks ease slightly ahead of U.S. midterm election, Fed * Hungarian bonds yields also drop, Polish bonds flat By Sandor Peto and Luiza Ilie BUDAPEST/BUCHAREST, Nov 6 Romania's 10-year government bond yields fell to their lowest levels after repeated liquidity injections into the market from the Romanian central bank, (NBR) which kept its interest rates on hold on Tuesday. Central European markets generally eased slightly in cautious trading in all asset classes as investors held their breath ahead of Tuesday's midterm elections in the United States and the Federal Reserve's two-day meeting from Wednesday. Regional currencies including the leu eased by about 0.1 percent against the euro. The NBR, which, like its Czech peer, has increased interest rates to fight inflation, kept its benchmark rate on hold at 2.5 percent as expected. It is due to hold a news conference at 1300 GMT. Since its last rate hike in May, the bank, projecting that inflation will retreat from its mid-year levels around 5 percent, has managed market interest rates through its liquidity policy including its repo auctions. After a tightening in liquidity in local markets in the past months, it injected over 16 billion lei into markets through an auction last week, and further 12 billion lei on Monday. With more money in markets, domestic government bonds became an attractive buy, after a surge in U.S. Treasury yields a month ago also boosted yields in many emerging markets including Romania and Hungary. Romania's 10- and 5-year bond yields have dropped about 40 basis points and the 2-year yield by almost 30 basis points in the past weeks. The 10-year yield, bid at 4.73 percent, reached its lowest level in almost six months on Tuesday, and other Romanian bond yields set multi-week lows. Hungarian yields have also retreated in the past weeks and the 10-year paper was the lowest since early October at 3.55 percent, down 37 basis points from its October peak. Polish yields, which are usually more stable and more willing to track German Bunds, were flat. The 10-year yield there, trading at 3.18 percent, has declined by only 15 basis points from its October peak. In Romania, apart from the NBR's liquidity injections, expectations for a drop in inflation helped push yields lower, analysts have said. "The conduct of the monetary policy stance by the ECB and by other central banks in the region (Poland and Hungary) would also allow the BNR to pause further the key rate hiking cycle," said Raiffeisen analyst Stephan Imre in a note. "Against this stable base rate outlook in the short to medium term, we believe that the yield pickup of ROMGBs (Romanian bonds in October) is attractive which has been also witnessed at yesterday's massively oversubscribed T-bond auction," he added. CEE SNAPSHOT AT MARKETS 1055 CET CURRENCI ES Latest Previous Daily Change bid close change in 2018 Czech <EURCZK= 25.8400 25.8120 -0.11% -1.15% crown > Hungary <EURHUF= 322.1500 322.0100 -0.04% -3.49% forint > Polish <EURPLN= 4.3117 4.3084 -0.08% -3.14% zloty > Romanian <EURRON= 4.6632 4.6610 -0.05% +0.35% leu > Croatian <EURHRK= 7.4350 7.4395 +0.06% -0.06% kuna > Serbian <EURRSD= 118.3500 118.3800 +0.03% +0.13% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2018 Prague 1071.37 1072.440 -0.10% -0.63% 0 Budapest 37747.95 37794.87 -0.12% -4.14% Warsaw 2220.11 2233.74 -0.61% -9.80% Bucharest 8596.00 8573.48 +0.26% +10.86% Ljubljana <.SBITOP 798.38 799.74 -0.17% -0.99% > Zagreb 1771.27 1771.45 -0.01% -3.89% Belgrade <.BELEX1 743.96 740.93 +0.41% -2.08% 5> Sofia 597.17 596.67 +0.08% -11.85% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.5530 0.0080 +220bps +2bps R> 5-year <CZ5YT=R 1.8660 0.0160 +204bps +2bps R> 10-year <CZ10YT= 2.1390 0.0080 +172bps +1bps RR> Poland 2-year <PL2YT=R 1.5390 -0.0120 +219bps -1bps R> 5-year <PL5YT=R 2.4270 -0.0020 +260bps +0bps R> 10-year <PL10YT= 3.1830 -0.0030 +276bps +0bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.05 2.20 2.35 1.96 <PRIBOR= > Hungary 0.32 0.61 0.93 0.00 Poland 1.76 1.80 1.89 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Reporting by Sandor Peto Editing by Matthew Mpoke Bigg)

Romania's top court halts disputed reforms attempted by ruling party

25 Oct 2018

BUCHAREST Romania's Constitutional Court struck down on Thursday dozens of changes to the criminal code made by the ruling Social Democrats that had been criticized by the European Union, diplomats and magistrates.

Corrected: Romania’s tug of war over rule of law nears the line

21 Oct 2018

BUCHAREST A power struggle between Romania's government and judiciary is reaching a tipping point that risks driving a new wedge between the European Union and its eastern members over democratic standards.

CEE MARKETS-Hungarian yield hits 3-year high, Romanian CPI surprises

10 Oct 2018

* Hungarian 10-year bond yield is highest since mid-2015 * Romania Sept CPI at 5 pct vs 4.8 pct analyst forecast * Analysts split over Romanian inflation trends By Sandor Peto and Luiza Ilie BUDAPEST/BUCHAREST, Oct 10 Hungary's 10-year government bond yield hit a 3-year high on Wednesday as a rise in U.S. Treasuries yields caused concerns in the country which has Central Europe's lowest short-term interest rates. The middle rate of bids and asks for the Hungarian 10-year yield reached 3.9 percent, the highest level since mid-2015, up 6 basis points from Tuesday's fixing. The corresponding U.S. Treasuries traded around 3.217 percent, near seven-year highs. Worries over Italy's budget deficit also kept euro zone bond markets under pressure, even though the Italian 10-year yield was slightly off 4-1/2-year highs. The global rise also pushed Poland's 10-year yield to its highest level since May, but in the region Hungarian bonds were the worst hit. "Because the central bank (NBH) efficiently keeps short-term rates low, all tension appears in long maturities," one Budapest-based trader said. The trader added that he could not remember the spread between short-term market interest rates, which are near zero, and long-term yields ever being as wide. The NBH said last month it was prepared to start monetary tightening if inflation trends justified such action. But it has kept its base rate at 0.9 percent, a record low and the region's lowest level, and has not tightened liquidity in domestic markets. "Market confidence that the bank will react (to a possible further rise in inflation) in time has evaporated. It is pricing in the chance that it will not and whenever sentiment worsens, our (bond) market gets a beating," the trader said. Hungary on Tuesday reported a surprise pick-up in annual inflation to 3.6 percent for September, and Romania on Wednesday published a 5 percent reading which was also above forecasts which were pegged at 4.8 percent. Romanian government bonds were mixed, with the 10-year paper's yield bid at 5.05 percent, even though the country's inflation remains the highest in the region and near its highest level in almost six years. Analysts were split on whether the inflation figures would nudge the Romanian central bank, which has kept market liquidity relatively tight, towards an interest rate increase after three hikes this year. Ciprian Dascalu, ING's chief economist in Romania, said that was unlikely to happen. "It would be hard for the central bank to revise its inflation forecast upward based on an upward surprise from volatile food prices for one month," he said. But Erste analyst Dorina Ilasco said the bank might consider possible future hikes at its Nov. 6 meeting, where it is due to discuss its new inflation report. "In view of today's reading, we revise our inflation forecast for December 2018 to 3.8 percent y/y, from 3.5 percent y/y," she said in a note. The leu traded steady at 4.664 against the euro at 1419 GMT, while the forint <EURHUF=< shed 0.3 percent, the zloty 0.2 percent and the Czech crown 0.1 percent. CEE SNAPSHOT AT MARKETS 1619 CET CURRENCI ES Latest Previous Daily Change bid close change in 2018 Czech <EURCZK= 25.8450 25.8110 -0.13% -1.17% crown > Hungary <EURHUF= 325.3000 324.4000 -0.28% -4.42% forint > Polish <EURPLN= 4.3140 4.3050 -0.21% -3.19% zloty > Romanian <EURRON= 4.6644 4.6650 +0.01% +0.33% leu > Croatian <EURHRK= 7.4080 7.4200 +0.16% +0.30% kuna > Serbian <EURRSD= 118.2700 118.4900 +0.19% +0.19% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2018 Prague 1095.60 1095.780 -0.02% +1.62% 0 Budapest 36926.56 37109.24 -0.49% -6.22% Warsaw 2194.42 2251.32 -2.53% -10.84% Bucharest 8528.31 8545.34 -0.20% +9.99% Ljubljana <.SBITOP 830.31 836.56 -0.75% +2.97% > Zagreb 1770.15 1775.19 -0.28% -3.95% Belgrade <.BELEX1 732.50 730.75 +0.24% -3.59% 5> Sofia 617.42 617.13 +0.05% -8.86% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.5040 -0.0290 +205bps -3bps R> 5-year <CZ5YT=R 1.8690 0.0180 +195bps +0bps R> 10-year <CZ10YT= 2.1720 0.0070 +161bps -1bps RR> Poland 2-year <PL2YT=R 1.6270 0.0080 +217bps +0bps R> 5-year <PL5YT=R 2.6110 0.0160 +269bps +0bps R> 10-year <PL10YT= 3.3090 0.0200 +275bps +0bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.02 2.20 2.33 1.75 <PRIBOR= > Hungary 0.49 0.81 1.17 0.17 Poland 1.78 1.82 1.88 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Jason Hovet in Prague; Editing by Kirsten Donovan and Ken Ferris)

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