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CEE MARKETS-Hungarian debt firms ahead of central bank meeting
December 20, 2016 / 10:24 AM / 9 months ago

CEE MARKETS-Hungarian debt firms ahead of central bank meeting

* Hungarian central bank seen limiting 3-month deposits
further
    * Hungarian debt yields fall, bill auction yield may fall to
zero
    * Zloty, forint trade near multi-week high vs euro
    * Poland removes media ban that provoked protest

    By Sandor Peto and Sujata Rao
    BUDAPEST/LONDON, Dec 20 (Reuters) - Hungarian government
debt prices firmed on Tuesday, bucking a rise in European bond
yields ahead of expected further monetary stimulus from the
Hungarian central bank's meeting.
    The bank has been boosting liquidity in local markets for
months to encourage banks to lend more cheaply and to buy
government debt.
    Growth in Central Europe has slowed this year although
increases to government spending and an inflow of European Union
funds could help it regain traction next year. 
    The National Bank of Hungary is expected to keep interest
rates on hold while pumping further liquidity into markets by
limiting the amount in its three-month deposit facility to 700
billion forints ($2.34 billion) at the end of March, compared
with 900 billion forints this month. 
    That limit and fx swap tenders are creating additional
demand for Hungarian debt, which is further boosted by year-end
debt expiries, one Budapest-based fixed income trader said.
    "At today's auction the yield on three-month bills may fall
to zero or near zero (from 0.12 percent a week ago)," he added.
    The yield on 10-year bonds dropped 8 basis points from
Monday's fixing to 3.18 percent and is now almost back at levels
seen before Donald Trump's U.S. election win last month led to a
surge in global long-term yields.
    Dealers said the global environment was supportive for
emerging market assets as the dollar was not advancing further
towards parity against the euro.  
    The forint firmed 0.1 percent to 311.35 against
the euro by 0943 GMT, near Monday's three-week highs.
    The zloty strengthened by 0.2 percent to 4.4125.
It touched a four-week high on Monday after November industrial
output and retail sales figures showed some pick up in growth.  
 
    Poland's lower chamber of parliament removed a temporary ban
on access for the media on Tuesday, which triggered days of
protests against the government.
    Concerns over the rule of law in Poland could affect its
assets in the long run and there are concerns that the budget
deficit will rise next year, but the prospect of a likely pick
up in economic growth helps, analysts said.
    "The NBP (Polish central bank) may be intervening not
through direct fx sales but possibly through the 10 billion
euros worth of cohesion funds (from the EU) which they can
choose to convert into zloty on fx markets, so it's possible
they have intervened," said Manik Narain, EM strategist at UBS
in London
    "Another possibility is that the powerful rally in HU
(Hungarian) bond markets is trickling into PL (Poland)."

           CEE      SNAP   AT  1043       
           MARKETS  SHOT  CET         
                    CURRENCIES            
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                    bid   clos  chan  in
                          e     ge    2016
 Czech     <EURCZK  27.0  27.0   +0.  -0.0
 crown     =>        210   325   04%    9%
 Hungary   <EURHUF  311.  311.   +0.  1.06
 forint    =>       3500  6500   10%     %
 Polish    <EURPLN  4.41  4.42   +0.  -3.5
 zloty     =>         25    04   18%    0%
 Romanian  <EURRON  4.52  4.52   +0.  -0.0
 leu       =>         03    12   02%    3%
 Croatian  <EURHRK  7.53  7.53   +0.  1.45
 kuna      =>         00    15   02%     %
 Serbian   <EURRSD  123.  123.   +0.  -1.6
 dinar     =>       4500  6000   12%    0%
 Note:     calcula  prev  clos  1800      
 daily     ted      ious  e at  CET   
 change    from                       
                    STOC                  
                    KS                
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                          clos  chan  in
                          e     ge    2016
 Prague             915.  912.   +0.  -4.3
                      15    46   29%    1%
 Budapest           3165  3164   +0.   +32
                    6.36  6.38   03%  .34%
 Warsaw    <.WIG20  1941  1924   +0.   +4.
           >         .88   .67   89%   45%
 Buchares           7015  7059  -0.6   +0.
 t                   .64   .75    2%   16%
 Ljubljan  <.SBITO  704.  703.   +0.   +1.
 a         P>         24    89   05%   16%
 Zagreb    <.CRBEX  1968  1967   +0.   +16
           >         .07   .12   05%  .48%
 Belgrade  <.BELEX  0.00  718.   +0.  -100
           15>              38   00%  .00%
 Sofia     <.SOFIX  572.  575.  -0.5   +24
           >          56    45    0%  .23%
                    BOND                  
                    S                 
                    Yiel  Yiel  Spre  Dail
                    d     d     ad    y
                    (bid  chan  vs    chan
                    )     ge    Bund  ge
                                      in
 Czech                                spre
 Republic                             ad
   2-year  <CZ2YT=  -0.9  -0.0  -021  -2bp
           RR>        99    09   bps     s
   5-year  <CZ5YT=  -0.2  -0.0   +02  -2bp
           RR>        09    08  9bps     s
           <CZ10YT  0.49  -0.0   +02  -2bp
 10-year   =RR>        7    03  3bps     s
 Poland                                   
   2-year  <PL2YT=  1.99  0.00   +27  -1bp
           RR>         9     3  9bps     s
   5-year  <PL5YT=  2.75  0.01   +32   +0b
           RR>         1     6  5bps    ps
           <PL10YT  3.41  0.01   +31   +0b
 10-year   =RR>        9     3  5bps    ps
           FORWARD  RATE  AGREEMENT       
                    3x6   6x9   9x12  3M
                                      inte
                                      rban
                                      k
 Czech     <CZKFRA  0.28  0.24  0.22     0
 Rep       ><PRIBO                    
           R=>                        
 Hungary   <HUFFRA  0.37  0.41   0.5  0.39
           ><BUBOR                    
           =>                         
 Poland    <PLNFRA  1.74  1.77  1.80  1.73
           ><WIBOR     5     5     5  
           =>                         
 Note:     are for                        
 FRA       ask                        
 quotes    prices                     
 *****************************************
 *********************
 

($1 = 299.6900 forints)

 (Additional reporting by Jakub Iglewski in Warsaw; Editing by
Catherine Evans)

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