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Sandor Peto

CEE MARKETS-Crown creeps higher after Czech bank retains neutral outlook

26 Jun 2019

* Czech central bank keeps rates on hold, retains neutral stance * Crown bucks easing of forint and zloty on dollar rebound * Crown is off 9-month highs reached on technical factors * Dovish ECB signals play key role in CEE central bank decisions (Recasts, with Czech central bank decision and comments) By Sandor Peto and Robert Muller BUDAPEST/PRAGUE, June 26 The crown bucked a weakening of other Central European currencies on Wednesday as the Czech central bank retained its neutral rate outlook, not following recent dovish signals from the U.S. Federal Reserve and the European Central Bank. The forint and the zloty shed 0.2% against the euro by 1330 GMT. They weakened as investors bought the dollar after a Federal Reserve official tempered expectations for aggressive monetary easing. Earlier expectations for deeper Fed rate cuts and last week's dovish comments from the European Central Bank were positive for currencies in Central Europe. Some market participants had expected dovish signals from the Czech central bank (CNB) at a news conference after a meeting on Wednesday. Governor Jiri Rusnok said the CNB continued to watch signals from abroad, but said rates could stay unchanged for a relatively long period and that the bank's stance was neutral. One of the seven rate setters even voted for a rate rise. The crown traded at 25.47 to the euro, a tad firmer than Tuesday's close but still near a nine-month high of 25.435 reached late on Tuesday. Domestic factors pushed some central banks in the region into tighter policies as economies in the region grow faster than euro zone peers, and strong wage growth has boosted consumer prices. Dovish policy signals from the ECB, however, suggest that prices of imports from the euro zone could slow and help moderate inflation pressure in Central Europe. The National Bank of Hungary (NBH) cited those signals after its meeting on Tuesday as a justification for keeping rates on hold despite a rise in annual inflation to near the top of its 2-4% target range, while it said it would continue to watch incoming economic data. Some liquidity tightening by the bank and a hike in its -0.05% overnight interest rate into positive territory remains likely in September, KBC analysts said in a note. "It is quite clear that the NBH's next move will be even more dependent on the ECB's action and they want to keep the low interest environment as long as possible," they said. Hungary's 10-year government bond yield was fixed 5 basis points higher at 2.66%, reflecting a smaller rise in the corresponding U.S. and German yields. CEE SNAPSHOT AT MARKETS 1530 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.4700 25.4780 +0.03% +0.93% crown > Hungary <EURHUF= 323.6000 322.9500 -0.20% -0.78% forint > Polish <EURPLN= 4.2626 4.2545 -0.19% +0.63% zloty > Romanian <EURRON= 4.7235 4.7199 -0.08% -1.47% leu > Croatian <EURHRK= 7.3950 7.3975 +0.03% +0.20% kuna > Serbian <EURRSD= 117.7600 117.8400 +0.07% +0.46% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1034.14 1040.050 -0.57% +4.82% 0 Budapest 40221.19 40061.95 +0.40% +2.77% Warsaw 2314.66 2303.31 +0.49% +1.67% Bucharest 8655.51 8594.90 +0.71% +17.22% Ljubljana <.SBITOP 887.83 890.23 -0.27% +10.39% > Zagreb 1902.38 1905.02 -0.14% +8.78% Belgrade <.BELEX1 724.06 722.28 +0.25% -4.94% 5> Sofia 576.77 575.34 +0.25% -2.98% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.5490 0.0760 +229bps +8bps R> 5-year <CZ5YT=R 1.3540 0.0600 +201bps +5bps R> 10-year <CZ10YT= 1.5210 -0.0250 +184bps -4bps RR> Poland 2-year <PL2YT=R 1.5790 0.0070 +232bps +1bps R> 5-year <PL5YT=R 1.9420 0.0130 +259bps +0bps R> 10-year <PL10YT= 2.3540 0.0360 +268bps +3bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.17 2.06 1.96 2.17 <PRIBOR= > Hungary 0.32 0.43 0.54 0.25 Poland 1.73 1.73 1.71 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Reporting by Sandor Peto Editing by Alexandra Hudson and Susan Fenton)

CEE MARKETS-Crown eases off 9-month high, Czech rates seen on hold

26 Jun 2019

* Crown joins CEE fx easing as dollar rebounds on Fed comments * Czech central bank seen keeping rates on hold * Crown is off 9-month highs reached on technical factors * Dovish ECB signals play key role in CEE central bank decisions By Sandor Peto and Robert Muller BUDAPEST/PRAGUE, June 26 The crown retreated from 9-month highs reached against the euro in the previous session as the Czech central bank (CNB) was expected to keep rates on hold at its meeting on Wednesday, and dollar buying weakened Central European currencies. Demand for the dollar often influences the region's units. Funds flowed into the greenback after a Federal Reserve official tempered expectations for aggressive monetary easing. The forint and the zloty shed 0.2% against the euro by 0831 GMT. The crown eased 0.1% to 25.497, still near Tuesday's 9-month highs of 25.435. The CNB, after delivering its eighth interest rate hike in two years in early May, is expected to keep its 2% two-week repo rate on hold in its decision due at 1100 GMT. Technical factors rather than monetary tightening expectations boosted the crown on Tuesday as some speculative positions were closed so as to stop losses, after the currency crossed 25.52-25.53 versus the euro, one dealer said. Positions are also closed in the market because the end of the half year is near. "I would not expect anything market-moving from the CNB today, after all, they can be quite happy with the crown at these levels," the dealer said. Earlier expectations for deeper Fed rate cuts and last week's dovish comments from the European Central Bank were positive to currencies in the European Union's eastern wing. Economies in the region grow faster than euro zone peers, and a fast catch-up with higher Western wages has boosted consumer prices in the past months. Dovish policy signals from the ECB, however, indicated that import prices could help moderate inflation. The National Bank of Hungary cited those signals after its meeting on Tuesday as a justification for keeping rates on hold despite a rise in annual inflation near the top of its 2-4% target range, while it said it would continue to watch incoming economic data. While most analysts expect Czech rates to stay on hold in the rest of the year, some market participants do not rule out dovish noise from the CNB. "We expect CPI to peak mainly due to considerable base effects related to energy prices and the headline rate to fall back towards the CNB 2% mid-target point in the upcoming months (similar to Hungary)," Raiffeisen analyst Stephan Imre said in a note. "This coupled with signs of economic moderation should prompt a moderate CNB easing cycle as early as Q1 2020; our call has received additional support recently on the heels of another ECB (& FED) dovish push," he added. CEE SNAPSHOT AT MARKETS 1031 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.4970 25.4780 -0.07% +0.82% crown > Hungary <EURHUF= 323.6500 322.9500 -0.22% -0.79% forint > Polish <EURPLN= 4.2635 4.2545 -0.21% +0.61% zloty > Romanian <EURRON= 4.7202 4.7199 -0.01% -1.40% leu > Croatian <EURHRK= 7.3950 7.3975 +0.03% +0.20% kuna > Serbian <EURRSD= 117.7600 117.8400 +0.07% +0.46% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1037.57 1040.050 -0.24% +5.17% 0 Budapest 40176.95 40061.95 +0.29% +2.65% Warsaw 2305.32 2303.31 +0.09% +1.26% Bucharest 8588.95 8594.90 -0.07% +16.32% Ljubljana <.SBITOP 889.24 890.23 -0.11% +10.57% > Zagreb 1903.10 1905.02 -0.10% +8.82% Belgrade <.BELEX1 721.69 722.28 -0.08% -5.25% 5> Sofia 574.27 575.34 -0.19% -3.40% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.5490 0.0760 +229bps +9bps R> 5-year <CZ5YT=R 1.3540 0.0600 +201bps +5bps R> 10-year <CZ10YT= 1.5210 -0.0250 +184bps -4bps RR> Poland 2-year <PL2YT=R 1.5730 0.0010 +232bps +1bps R> 5-year <PL5YT=R 1.9330 0.0040 +259bps -1bps R> 10-year <PL10YT= 2.3460 0.0280 +267bps +2bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.17 2.06 1.96 2.17 <PRIBOR= > Hungary 0.33 0.42 0.52 0.24 Poland 1.74 1.73 1.71 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Reporting by Sandor Peto Editing by Alexandra Hudson)

CEE MARKETS-Forint rebounds on central bank CPI forecasts increase

25 Jun 2019

(Updates after Hungarian central bank meeting) By Sandor Peto BUDAPEST, June 25 The forint rebounded from a three-week low to a five-day high versus the euro on Tuesday after the Hungarian central bank (NBH) raised its inflation forecasts. The currency eased to 324.6 against the euro after the bank kept interest rates on hold, disappointing some market participants who had bet that it would raise its overnight deposit rate from -0.05%. It jumped to 323.1, 0.1% firmer from Monday, after the bank increased its growth and inflation forecasts, projecting that prices would rise an average 3.3 percent in 2021. That is within the NBH's 2-4% target range, but the bank also said in a statement that data in the second half of the year will be key to the inflation outlook, and that it maintained its cautious approach. Deputy Governor Marton Nagy also saw growing evidence of a rise in pressure in the economy. "Some people might think that if even the central bank sees higher inflation, (the possibility of) an interest rate hike can drift back into the picture," one Budapest-based currency dealer said. Expectations of monetary tightening have been revised after European Central Bank chief Mario Draghi struck a dovish tone last week. Some market participants still thought that low inflation pressure from the euro zone could keep a lid on prices even though a surge in wages across Central Europe is boosting domestic demand and driving up consumer prices. "The market has calmed down, there is nothing to see here," a Budapest-based fixed income trader said, adding that trading in the government bond market was lukewarm and driven by a drop in yields in developed markets rather than domestic news. Hungary's 10-year bonds traded at a yield of 2.6%, down 2 basis points from Monday's fixing, while Poland's corresponding yield shed 4 basis points to 2.31%. Central European currencies were mixed, with the Czech crown and the leu firming 0.1 percent and the zloty easing slightly. Poland's M3 money supply data for May showed continuing robust annual growth, even though the 9.9 percent figure was slightly below analysts' 10 percent forecast. Some analysts said before the figures that they could herald a rise in core inflation and worry some rate-setters at the central bank, which sees interest rates on hold for years. As fears of a global trade war and U.S.-Iran sanctions left investors gravitating toward less risky bonds, the region's stocks weakened like those in other emerging markets. CEE SNAPSHOT AT MARKETS 1534 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5400 25.5750 +0.14% +0.65% crown > Hungary <EURHUF= 323.2500 323.4500 +0.06% -0.67% forint > Polish <EURPLN= 4.2550 4.2535 -0.04% +0.81% zloty > Romanian <EURRON= 4.7190 4.7229 +0.08% -1.38% leu > Croatian <EURHRK= 7.3960 7.3973 +0.02% +0.19% kuna > Serbian <EURRSD= 117.7500 117.8300 +0.07% +0.47% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1043.77 1056.180 -1.17% +5.80% 0 Budapest 40154.82 40475.09 -0.79% +2.60% Warsaw 2318.91 2331.08 -0.52% +1.86% Bucharest 8626.88 8625.92 +0.01% +16.84% Ljubljana <.SBITOP 890.23 890.23 +0.00% +10.69% > Zagreb 1905.02 1905.02 +0.00% +8.93% Belgrade <.BELEX1 722.28 720.44 +0.26% -5.17% 5> Sofia 575.78 580.11 -0.75% -3.14% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.5740 0.0890 +230bps +8bps R> 5-year <CZ5YT=R 1.3560 0.0350 +201bps +4bps R> 10-year <CZ10YT= 1.5260 0.0040 +185bps +2bps RR> Poland 2-year <PL2YT=R 1.5740 -0.0340 +230bps -4bps R> 5-year <PL5YT=R 1.9340 -0.0220 +259bps -1bps R> 10-year <PL10YT= 2.3310 -0.0280 +266bps -1bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.18 2.08 1.99 2.17 <PRIBOR= > Hungary 0.30 0.39 0.49 0.24 Poland 1.73 1.72 1.71 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Reporting by Marton Dunai and Sandor Peto; Editing by Catherine Evans)

CEE MARKETS-Currencies gain as dollar weakens on expectations of U.S. rate cuts

24 Jun 2019

* Polish retail sales growth slows, but remains robust * Zloty trades near 11-month highs * Forint consolidates, central bank holds regular FX swap tender * Hungarian central bank seen holding fire on Tuesday * Croatia's kuna hits 6 1/2-month high vs euro By Sandor Peto BUDAPEST, June 24 Central European currencies mostly gained on Monday as the dollar weakened amid expectations the Federal Reserve will cut U.S. interest rates this year. Currencies in emerging markets, including eastern European Union members, often strengthen when the dollar is sold. The zloty rose 0.1% to 4.2522 against the euro by 1001 GMT, near the 11-month highs it reached at 4.2512 on Friday. The gains came after Poland reported annual retail sales growth slowed to 7.3% in May from 13.6% in April, somewhat below analyst forecasts. The still reflected solid domestic demand, which has been driven economic growth in the region, analysts said. Investors will now watch for M3 money supply figures for May, due on Tuesday, after a 10.4% annual surge recorded for April. Despite a regional rise in inflation in the region this year, Poland's annual inflation remained within the central bank's target range of 1.5% to 3.5% in May. The bank has signalled that its interest rates could remain at record lows for years, but the jump in money supply, which may herald a future rise in core inflation, may worry hawkish rate setters in Poland, Danske Bank analysts said in a note. The next central bank to meet in the region is Hungary's. It is unlikely to tighten policy, analysts and dealers said. The forint traded at 323.9 against the euro, after some weakening last week. "Domestic inflation is high... but the bank believes inflation pressure from abroad will ease," one Budapest-based dealer said. The overnight interbank rate ticked up to 0.45% from 0.42% on Friday, still above the 0.25% three-month rate, indicating that forint liquidity remained tight. The central bank held an extraordinary FX swap tender on Wednesday to ease a liquidity shortage partly caused by strong buying of a new retail government bond issued early this month. The bank holds its regular weekly FX swap tender on Monday. Elsewhere, Croatia's kuna rose 0.2 percent to 7.3888 against the euro, touching its strongest level in more than six months. The kuna often strengthens in the summer when tourists flock to resorts on the Croatian seaside. CEE SNAPSHOT AT MARKETS 1201 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.6000 25.6000 +0.00% +0.42% crown > Hungary <EURHUF= 323.9000 323.9400 +0.01% -0.87% forint > Polish <EURPLN= 4.2522 4.2566 +0.10% +0.88% zloty > Romanian <EURRON= 4.7220 4.7250 +0.06% -1.44% leu > Croatian <EURHRK= 7.3888 7.4030 +0.19% +0.29% kuna > Serbian <EURRSD= 117.7300 117.8500 +0.10% +0.48% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1053.43 1053.470 -0.00% +6.78% 0 Budapest 40332.32 40387.21 -0.14% +3.05% Warsaw 2322.56 2308.32 +0.62% +2.02% Bucharest 8741.80 8746.18 -0.05% +18.39% Ljubljana <.SBITOP 886.94 891.23 -0.48% +10.28% > Zagreb 1907.09 1906.47 +0.03% +9.05% Belgrade <.BELEX1 721.16 720.27 +0.12% -5.32% 5> Sofia 580.17 578.86 +0.23% -2.40% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.6030 0.0800 +233bps +9bps R> 5-year <CZ5YT=R 1.4360 0.0150 +208bps +3bps R> 10-year <CZ10YT= 1.5310 0.0030 +184bps +3bps RR> Poland 2-year <PL2YT=R 1.6080 0.0380 +233bps +4bps R> 5-year <PL5YT=R 1.9620 -0.0220 +261bps -1bps R> 10-year <PL10YT= 2.3560 -0.0470 +267bps -2bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.18 2.07 1.97 2.17 <PRIBOR= > Hungary 0.29 0.38 0.47 0.24 Poland 1.74 1.72 1.71 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Reporting by Sandor Peto)

CEE MARKETS-Polish bond yield sets 4-year low, currencies rise despite firm dollar

14 Jun 2019

* Bond yields track core markets lower on politics, growth worries * Poland's 10-year bond yield at lowest since early 2015 * Regional currencies set multi-month highs, stocks mostly ease * Currencies shrug off dollar rebound on U.S. retail sales data (Adds U.S. retail sales, new comments) By Sandor Peto and Alicja Ptak BUDAPEST/WARSAW, June 14 Poland's 10-year government bond yield sank to its lowest level in more than four years on Friday after an attack on two oil tankers in the Gulf, which the United States blamed on Iran, led to global buying of less risky assets. Tehran denied the allegation following the attacks on Thursday, but concerns grew about a new U.S.-Iranian confrontation. The Polish paper traded at 2.3895% at 0843 GMT, down 3 basis points from Thursday's close. "(There is a) big drop in yields worldwide, (and) the rising presence of foreign investors dragged (Polish) yields down," said Michal Zak, dealer at mBank. "Yesterday's (Polish government bond) auction apparently has not covered all positions, if only a day after we see a 10 basis point drop," he added, referring to the fall in yield from Thursday's peak. Other Central European bond yields also dropped, and currencies mainly firmed slightly, despite a rebound in U.S. yields and the dollar against major currencies, partly after better-then-expected U.S. retail sales data. In recent weeks, dollar sales have helped the region's main currencies to firm, and on Friday the zloty touched a 10-month high against the euro at 4.2525, and the Czech crown a 9-month high at 25.523. "The reverse correlation with the dollar does not work 100 percent. There is hardly any trade in local markets right now, this is a sleepy Friday," one Budapest-based dealer said. "After the retail figures... the first U.S. rate cut may come later, but the expectation is still for cuts." Despite a rise in U.S. Treasury bond yields, German yields remained lower, though the 10-year yield was off record lows touched earlier in the session. Although a surge in wages in the region is pushing consumer prices higher, Poland has the lowest annual inflation among Central Europe's main economies - revised up to 2.4 percent for May on Friday. Polish rate setter Jerzy Osiatynski said the central bank may need to start to increase its record low interest rates next year, but that in 2019 borrowing costs would not change. Hungary's 10-year yield was fixed lower by 5 basis points from Thursday's fixing at 2.74%. The forint firmed 0.1 percent to 321.8 versus the euro. CEE SNAPSHOT AT MARKETS 1517 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5250 25.5600 +0.14% +0.71% crown > Hungary <EURHUF= 321.8000 322.1400 +0.11% -0.22% forint > Polish <EURPLN= 4.2559 4.2564 +0.01% +0.79% zloty > Romanian <EURRON= 4.7225 4.7215 -0.02% -1.45% leu > Croatian <EURHRK= 7.4120 7.4130 +0.01% -0.03% kuna > Serbian <EURRSD= 117.9200 118.0000 +0.07% +0.32% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1049.66 1050.880 -0.12% +6.40% 0 Budapest 40636.65 40469.80 +0.41% +3.83% Warsaw 2289.25 2300.20 -0.48% +0.55% Bucharest 8516.02 8477.19 +0.46% +15.34% Ljubljana <.SBITOP 871.72 870.12 +0.18% +8.39% > Zagreb 1897.72 1901.30 -0.19% +8.51% Belgrade <.BELEX1 724.20 729.35 -0.71% -4.92% 5> Sofia 579.80 578.71 +0.19% -2.47% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.6150 0.0280 +230bps +5bps R> 5-year <CZ5YT=R 1.5410 0.0390 +214bps +4bps R> 10-year <CZ10YT= 1.5840 -0.0140 +183bps -1bps RR> Poland 2-year <PL2YT=R 1.5760 -0.0200 +226bps +1bps R> 5-year <PL5YT=R 1.9660 -0.0200 +257bps -2bps R> 10-year <PL10YT= 2.4070 -0.0450 +265bps -4bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.17 2.06 1.95 2.17 <PRIBOR= > Hungary 0.29 0.41 0.51 0.18 Poland 1.74 1.73 1.71 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Jason Hovet in Prague; Editing by Kirsten Donovan and Gareth Jones)

CEE MARKETS-Polish 10-year bond yield drops to 4-year low

14 Jun 2019

* Bond yields track core markets lower on politics, growth worries * Poland's 10-year bond yield at lowest since early 2015 * Regional currencies set multi-month highs, stocks mostly ease By Sandor Peto and Alicja Ptak BUDAPEST/WARSAW, June 14 Poland's 10-year government bond yield sank to its lowest level in more than four years on Friday after an attack on two oil tankers in the Gulf, which the United States blamed on Iran, led to global buying of less risky assets. Tehran denied the allegation following the attacks on Thursday, but concerns grew about a new U.S.-Iranian confrontation. The Polish paper traded at 2.3895% at 0843 GMT, down 3 basis points from Thursday's close. "(There is a) big drop in yields worldwide, (and) the rising presence of foreign investors dragged (Polish) yields down," said Michal Zak, dealer at mBank. "Yesterday's (Polish government bond) auction apparently has not covered all positions, if only a day after we see a 10 basis point drop," he added, referring to the fall in yield from Thursday's peak. Bucharest's government bond auction also drew robust demand on Thursday. Although a surge in wages in the region is pushing consumer prices higher, Poland has the lowest annual inflation in the region - revised up to 2.4 percent for May on Friday. Polish rate setter Jerzy Osiatynski said that the central bank may need to start to increase its record low interest rates next year, but in 2019 the cost of credit will not be changed. The corresponding Hungarian yield dropped 4 basis points from Thursday's fixing to 2.75%. "This is what we see recently: bonds are the first to react," one Budapest-based fixed income trader said, adding that worries over global economic growth and politics had pushed yields lower anyway in the past weeks. "All yields are coming down in the world, independent of government budgets and other local factors," the trader said. Bond yields in fast-growing central Europe are above those in the United States, where 10-year Treasuries traded around 2.067%, and well above the corresponding Bund yield which fell to record lows on Friday near -0.27%. Regional stocks mostly eased as worries over the U.S.-China trade war and mixed economic data from China weighed on global stock markets. The United States is due to release key retail sales and industrial production data later on Friday. If the U.S. figures are weak, they are likely to reinforce expectations for Federal Reserve interest rate cuts, which have led to dollar selling in the past weeks, boosting Central European currencies to multi-month highs. The dollar moved sideways against a basket of currencies on Friday and Central European units were also treading water. The zloty, however, touched a 10-month high against the euro at 4.253, and the Czech crown a 5-month high at 25.55. CEE SNAPSHOT AT MARKETS 1043 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5620 25.5600 -0.01% +0.57% crown > Hungary <EURHUF= 321.8800 322.1400 +0.08% -0.25% forint > Polish <EURPLN= 4.2555 4.2564 +0.02% +0.80% zloty > Romanian <EURRON= 4.7225 4.7215 -0.02% -1.45% leu > Croatian <EURHRK= 7.4110 7.4130 +0.03% -0.01% kuna > Serbian <EURRSD= 117.8200 118.0000 +0.15% +0.41% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1046.99 1050.880 -0.37% +6.13% 0 Budapest 40279.81 40469.80 -0.47% +2.91% Warsaw 2285.58 2300.20 -0.64% +0.39% Bucharest 8482.64 8477.19 +0.06% +14.88% Ljubljana <.SBITOP 868.72 870.12 -0.16% +8.01% > Zagreb 1899.80 1901.30 -0.08% +8.63% Belgrade <.BELEX1 728.54 729.35 -0.11% -4.35% 5> Sofia 578.23 578.71 -0.08% -2.73% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.6100 0.0240 +229bps +4bps R> 5-year <CZ5YT=R 1.5540 0.0530 +216bps +7bps R> 10-year <CZ10YT= 1.5840 -0.0140 +185bps +1bps RR> Poland 2-year <PL2YT=R 1.5970 0.0010 +228bps +2bps R> 5-year <PL5YT=R 1.9450 -0.0410 +256bps -3bps R> 10-year <PL10YT= 2.4000 -0.0520 +266bps -3bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.17 2.06 1.95 2.17 <PRIBOR= > Hungary 0.29 0.44 0.57 0.18 Poland 1.74 1.73 1.71 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Jason Hovet in Prague; Editing by Kirsten Donovan)

CEE MARKETS-Czech crown gains; central banker says room for rate rise

13 Jun 2019

* Crown gains as rate-setter Benda sees room for rate increase * Loose Fed, euro zone growth concern blurs CEE rate outlook * Hungarian rates jump on retail bond sale success By Sandor Peto and Jason Hovet BUDAPEST/PRAGUE, June 13 The crown gained on Thursday after a Czech central bank board member said he still saw room to raise interest rates. Other Central European currencies fell. The remarks by Czech policy-maker Vojtech Benda came in a Bloomberg interview that followed similarly hawkish comments made the governor of the central bank, Jiri Rusnok, on Tuesday. The outlook for Central European interest rates is unclear. The Federal Reserve is expected to cut rates soon and the European Central Bank might eventually follow suit. Central Europe's economies are linked with both regions, especially the euro zone. But surging wages are fuelling inflation in Central Europe, putting pressure on its central banks to raise rates. The uncertainty over rates is the most visible in the Czech Republic, where forward rate agreements price in rate cuts, after eight rate increases since 2017. The crown rose to 25.58 versus the euro by 0844 GMT. The forint and the zloty each fell 0.1%. The leu continued to fall from five-month highs, trading at 4.7245 versus the euro, after April figures showed weak annual growth in industrial output and a widening in the current account deficit in Romania. The central bank is widely expected to fight inflation by tightening liquidity in leu markets, but some analysts said after Tuesday's higher-than-expected inflation data that the bank may discuss a rate increase. In Hungary, the successful introduction of a new retail government bond reduced forint liquidity, casting doubt on the need of a further cut in the central bank's liquidity-creating FX swaps at its meeting on June 25. The overnight BUBOR interbank interest rate has quadrupled since last week, to 0.24 percent, rising above longer maturities. Depressed Bund and U.S. Treasury yields, coupled with the strong retail bond sales, can help Hungary's debt agency AKK to lengthen the average maturity of its outstanding debt, traders said. Government bond yields were mostly flat in the region. Hungary's 10-year bond traded around 2.8%. CEE SNAPSHOT AT MARKETS 1044 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5800 25.5820 +0.01% +0.50% crown > Hungary <EURHUF= 322.2500 322.0000 -0.08% -0.36% forint > Polish <EURPLN= 4.2605 4.2580 -0.06% +0.68% zloty > Romanian <EURRON= 4.7245 4.7235 -0.02% -1.49% leu > Croatian <EURHRK= 7.4170 7.4115 -0.07% -0.09% kuna > Serbian <EURRSD= 117.9800 118.0100 +0.03% +0.27% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1054.36 1051.990 +0.23% +6.87% 0 Budapest 40764.97 40592.32 +0.43% +4.15% Warsaw 2286.98 2282.80 +0.18% +0.45% Bucharest 8577.98 8591.06 -0.15% +16.17% Ljubljana <.SBITOP 872.22 870.54 +0.19% +8.45% > Zagreb 1912.50 1912.85 -0.02% +9.36% Belgrade <.BELEX1 731.91 731.10 +0.11% -3.91% 5> Sofia 577.17 578.63 -0.25% -2.91% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.6860 0.0790 +235bps +8bps R> 5-year <CZ5YT=R 1.5020 -0.0230 +210bps -2bps R> 10-year <CZ10YT= 1.6230 0.0120 +187bps +2bps RR> Poland 2-year <PL2YT=R 1.6380 -0.0260 +231bps -2bps R> 5-year <PL5YT=R 2.0120 -0.0140 +261bps -1bps R> 10-year <PL10YT= 2.5000 -0.0020 +275bps +1bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.15 2.05 1.96 2.17 <PRIBOR= > Hungary 0.29 0.44 0.57 0.18 Poland 1.75 1.72 1.71 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Radu Marinas in Bucharest, editing by Larry King)

CEE MARKETS-Leu eases though CPI remains high; dollar rebound hits forint

12 Jun 2019

* Currencies fall in profit-taking after rally * Romania's May inflation higher than expected * Romanian central bank could tighten leu liquidity (Adds dollar rebound, zloty/forint, Czech auction result, Croatian euro bond) By Sandor Peto BUDAPEST, June 12 Central European currencies and stocks mostly fell as risk aversion increased amid the threat of the U.S.-China trade war and the dollar regained some ground after U.S. inflation data. The leu did not benefit from higher-than-expected May inflation. The crown also weakened after Tuesday's Czech inflation data showed a pick-up, even though it regained some ground on Wednesday. The region's main currencies have risen to multi-week or multi-month highs against the euro in recent weeks as expectations for Federal Reserve interest rate cuts led to a selling of the dollar. The dollar's cautious rebound on Wednesday mainly affected the forint, which is unlikely to receive support from a meeting of the National Bank of Hungary on June 25, dealers said. The forint fell 0.3% against the euro to 321.9 by 1423 GMT. The zloty firmed slightly versus the euro, and continued to rebound against the Hungarian unit, firming through 75.5. Romania's leu shed 0.1% against the euro. Remaining near five-month highs, it traded at 4.724. "This easing is not big, and following the past weeks' surge, it is normal," one Budapest-based dealer said. Romania's annual inflation was steady at 4.1% percent in May, above the central bank's 1.5% to 3.5% target range and forecasts. Inflation could retreat slightly by the year-end. But the central bank will need to fight high core inflation, using its variable rate tenders to stem a likely rise in liquidity in leu markets in the coming months, ING Bank said in a note. "Given the global context, the probability for rate hikes ... is very low," the note said. Romanian bonds were mixed, with the yield on two-year debt bid lower by 5 basis points at 3.46% and the 10-year yield rising 9 basis points to 4.75%, while Poland's 10-year yield dropped 4 basis points to 2.485%. Expected continuing loose monetary policy in the euro zone also fuels uncertainty over Czech interest rates. Czech forward rate agreements price in rate cuts, but some analysts believe the Czech central bank's next move will be its ninth rate increase since 2017, in a bid to fight inflation. Czech government bonds drew solid demand at an auction. Supply can dry up in the summer, Komercni Banka traders said in a note ahead of the sale. A drop in primary supply is also a risk in Hungary, which sold 529 billion forints ($1.87 billion) worth of a new high-yield retail savings bond in a week, the biggest weekly outflow ever recorded. "The debt agency AKK will want to see how it goes in the next weeks, and if they change financing policy, more FX bond repurchases is one of the options," one Budapest-based bond trader said. A 10-year euro-denominated bond launched by Croatia was robustly oversubscribed on Wednesday. CEE SNAPSHOT AT MARKETS 1623 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.6080 25.6240 +0.06% +0.39% crown > Hungary <EURHUF= 321.9000 321.0500 -0.26% -0.25% forint > Polish <EURPLN= 4.2580 4.2628 +0.11% +0.74% zloty > Romanian <EURRON= 4.7245 4.7201 -0.09% -1.49% leu > Croatian <EURHRK= 7.4125 7.4135 +0.01% -0.03% kuna > Serbian <EURRSD= 117.8800 118.0100 +0.11% +0.36% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1050.14 1061.890 -1.11% +6.44% 0 Budapest 40582.11 41234.66 -1.58% +3.69% Warsaw 2274.22 2295.60 -0.93% -0.11% Bucharest 8608.22 8633.12 -0.29% +16.58% Ljubljana <.SBITOP 870.54 871.97 -0.16% +8.24% > Zagreb 1912.85 1910.46 +0.13% +9.38% Belgrade <.BELEX1 731.10 731.70 -0.08% -4.02% 5> Sofia 578.63 580.34 -0.29% -2.66% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.5900 0.0150 +225bps +2bps R> 5-year <CZ5YT=R 1.5040 -0.0260 +210bps -2bps R> 10-year <CZ10YT= 1.6520 0.0060 +189bps +1bps RR> Poland 2-year <PL2YT=R 1.6640 0.0100 +233bps +1bps R> 5-year <PL5YT=R 2.0280 -0.0090 +262bps +0bps R> 10-year <PL10YT= 2.5070 -0.0420 +274bps -4bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.16 2.06 1.97 2.17 <PRIBOR= > Hungary 0.29 0.40 0.53 0.18 Poland 1.73 1.72 1.71 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Radu Marinas in Bucharest, Jason Hovet in Prague and Alicja Ptak in Warsaw; editing by Larry King and Gabrielle Tétrault-Farber)

CEE MARKETS-Leu eases though CPI remains high; bonds mostly firm

12 Jun 2019

* Currencies fall in profit-taking after rally * Romania's May inflation is higher than expected * Romanian central bank could tighten leu liquidity * Czech bond auction is seen drawing solid demand By Sandor Peto BUDAPEST, June 12 Central European currencies and stocks mostly fell as risk aversion increased amid the threat of the U.S.-China trade war and the approach of U.S. inflation data. The leu failed to benefit from higher-than-expected May inflation. The crown also weakened after Tuesday's Czech inflation data showed a pick-up, and was steady on Wednesday. The region's main currencies rose to multi-week or multi-month highs against the euro in recent weeks as expectations for Federal Reserve interest rate cuts led to a selling of the dollar. But the dollar's weakening slowed by this week. The forint fell 0.2% against the euro on Wednesday, to trade at 321.76 at 0828. The zloty and the leu shed 0.1%, with the latter remaining near five-month highs, trading at 4.724. "This easing is not big, and following the past weeks' surge, it is normal," one Budapest-based dealer said. Romania's annual inflation was steady at 4.1% percent in May, above the central bank's 1.5% to 3.5% target range and forecasts. Inflation could retreat somewhat by the year-end. But the central bank will need to fight high core inflation, using its variable rate tenders to stem a likely rise in liquidity in leu markets in coming months, ING Bank said in a note. "Given the global context, the probability for rate hikes ... is very low," the note said. Romanian bonds were mixed, with the yield on two-year debt bid lower by 6 basis points at 3.45% and the 10-year yield rising 9 basis points to 4.75%. Expected Fed rate cuts and continuing loose monetary policy in the euro zone also fuelled uncertainty over Czech interest rates. Czech forward rate agreements price in rate cuts, but some analysts believe the Czech central bank's next move will be its ninth rate increase since 2017, to fight inflation. Czech government bonds with 2016 and 2033 expiry offered at an auction on Wednesday are expected to draw solid demand because supply can dry up in the summer, Komercni Banka traders said in a note. A drop in primary supply is also a risk in Hungary, which sold 529 billion forints ($1.87 billion) worth of a new high-yield retail savings bond in a week, the biggest weekly outflow ever recorded. "The debt agency AKK will want to see how it goes in the next weeks, and if they change financing policy, more FX bond repurchases is one of the options," one Budapest-based bond trader said. Hungarian government bond yields dropped 2 to 3 basis points, tracking Bunds, with the 10-year bond trading around 2.81%. CEE SNAPSHOT AT MARKETS 1028 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.6210 25.6240 +0.01% +0.34% crown > Hungary <EURHUF= 321.7600 321.0500 -0.22% -0.21% forint > Polish <EURPLN= 4.2650 4.2628 -0.05% +0.58% zloty > Romanian <EURRON= 4.7240 4.7201 -0.08% -1.48% leu > Croatian <EURHRK= 7.4100 7.4135 +0.05% +0.00% kuna > Serbian <EURRSD= 117.9000 118.0100 +0.09% +0.34% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1056.68 1061.890 -0.49% +7.11% 0 Budapest 40866.35 41234.66 -0.89% +4.41% Warsaw 2281.60 2295.60 -0.61% +0.22% Bucharest 8659.65 8633.12 +0.31% +17.28% Ljubljana <.SBITOP 871.28 871.97 -0.08% +8.33% > Zagreb 1922.65 1910.46 +0.64% +9.94% Belgrade <.BELEX1 732.31 731.70 +0.08% -3.86% 5> Sofia 580.90 580.34 +0.10% -2.28% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.7150 0.1400 +237bps +14bps R> 5-year <CZ5YT=R 1.5230 -0.0080 +211bps -1bps R> 10-year <CZ10YT= 1.6510 0.0050 +189bps +1bps RR> Poland 2-year <PL2YT=R 1.6560 0.0020 +232bps +0bps R> 5-year <PL5YT=R 2.0430 0.0060 +263bps +1bps R> 10-year <PL10YT= 2.5390 -0.0100 +277bps -1bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.17 2.08 2.00 2.17 <PRIBOR= > Hungary 0.29 0.44 0.52 0.18 Poland 1.74 1.73 1.73 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Radu Marinas in Bucharest, Jason Hovet in Prague and Alicja Ptak in Warsaw; editing by Larry King )

UPDATE 1-CEE MARKETS-CPI rise fails to boost Czech crown as dollar consolidates

11 Jun 2019

* Czech CPI rises, CNB chief says hike is optimal next move * Czech markets remain split over interest rate outlook * CEE currencies retreat as dollar decline halts * Poland leads rise in bond yields as money flows into equities (Adds further Czech central bank comments, bonds, stocks) By Sandor Peto and Jason Hovet BUDAPEST/PRAGUE, June 11 A surprise rise in Czech inflation failed to strengthen the crown on Tuesday as Central European currencies pause this week after a rallying to multi-week highs on global dollar selling. The greenback has weakened in the recent weeks on growing expectations for Federal Reserve interest rate cuts but steadied on Tuesday. While inflation has been moderate in developed economies, it has been pushed higher by a surge in wages in the European Union's fast-growing emerging markets. The correlation of the Czech crown's and the forint's euro crosses with the dollar index is the strongest this year. With the dollar consolidating, the forint eased 0.2% to 320.75 against the euro by 1241 GMT. The crown, the zloty and the leu shed 0.1%. Czech annual inflation picked up to 2.9% in May, above the 2.7% forecast by analysts. It would be optimal if the current pause in monetary policy changes is followed by more interest rate growth as rates are still not at normal levels, Czech central bank (CNB) Governor Jiri Rusnok said. That is a change compared to comments suggesting neutrality after the CNB's latest interest rate hike in early May. Core inflation was marginally lower than expected and the new figures bear out the message of the CNB's current forecast, the bank said in a statement, adding that overall inflation pressures were easing. Market participants remained split over the CNB interest rate outlook after the figures. Some analysts predict that the CNB will continue to increase interest rates this year or next, but markets are pricing in an easing as the European Central Bank is also expected to maintain a loose policy. Yields on Czech domestic bonds and forward rate agreements ticked slightly higher, with the 10-year bond yield at around 1.61%. "We (still) have nearly two rate cuts priced in (over the next year) which is strongly overdone," a dealer said. Polish yields also rose, tracking Bunds and other euro zone bonds as investments flowed into riskier equity markets after the United States stepped back from imposing trade tariffs on Mexico. The 10-year Polish yield rose 4 basis points to 2.537%, while Hungary bucked the trend with its 10-year yield falling by 3 basis points to 2.85%. Budapest's main equity index rose 0.6%, mainly driven by an 1.2% rise in OTP Bank shares, which managed to break through a technical line at 12,400 forints after several failed attempts in the past month. CEE SNAPSHOT AT MARKETS 1441 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.6400 25.6200 -0.08% +0.26% crown > Hungary <EURHUF= 320.7500 320.0500 -0.22% +0.10% forint > Polish <EURPLN= 4.2678 4.2630 -0.11% +0.51% zloty > Romanian <EURRON= 4.7236 4.7190 -0.10% -1.47% leu > Croatian <EURHRK= 7.4130 7.4155 +0.03% -0.04% kuna > Serbian <EURRSD= 118.0400 117.9500 -0.08% +0.22% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1063.87 1059.220 +0.44% +7.84% 0 Budapest 41406.56 41159.57 +0.60% +5.79% Warsaw 2298.00 2282.51 +0.68% +0.94% Bucharest 8626.22 8583.26 +0.50% +16.83% Ljubljana <.SBITOP 872.28 879.66 -0.84% +8.46% > Zagreb 1904.73 1889.07 +0.83% +8.92% Belgrade <.BELEX1 731.70 731.88 -0.02% -3.94% 5> Sofia 578.64 581.37 -0.47% -2.66% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.6060 0.0060 +227bps +66bps R> 5-year <CZ5YT=R 1.5360 0.0240 +212bps +61bps R> 10-year <CZ10YT= 1.6890 0.0360 +192bps +26bps RR> Poland 2-year <PL2YT=R 1.6570 0.0050 +232bps +66bps R> 5-year <PL5YT=R 2.0460 0.0900 +263bps +67bps R> 10-year <PL10YT= 2.5570 0.0800 +278bps +31bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.15 2.07 1.97 2.17 <PRIBOR= > Hungary 0.29 0.42 0.55 0.18 Poland 1.75 1.74 1.73 1.72 Note: FRA are for ask prices quotes ************************************************* ************* ($1 = 283.2000 forints) (Reporting by Sandor Peto; Editing by Kirsten Donovan)

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