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CEE MARKETS-Hungarian bonds jump as central bank announces swaps
May 24, 2017 / 3:10 PM / 4 months ago

CEE MARKETS-Hungarian bonds jump as central bank announces swaps

    * Hungarian central bank IRS announcement lifts bond prices
    * Currencies, stocks mostly rebound after retreat from highs
    * Bucharest stocks hit highest level since early
2008

 (Recasts with Hungarian government bonds, forint and zloty
surge)
    By Sandor Peto and Robert Muller
    BUDAPEST/PRAGUE, May 24 (Reuters) - Hungarian government
bonds strengthened on Wednesday after the central bank said that
it would offer interest rate swaps which could make bond buying
more attractive to commercial banks.
    Central European government bonds were mixed while 
currencies and stocks mostly rebounded after a retreat in the
past two sessions due to profit-taking.
    China's credit rating downgrade by Moody's did not have an
impact and with a lack of major international market moving
factors, investors are watching technical issues and comments
from central bankers in the region, market participants said.
    Hungarian central bank deputy Governor Marton Nagy told
Reuters late on Tuesday that the bank's record low base rate
could remain unchanged until 2019 or even longer. 
    Loose policy from the region's most dovish central bank was
not a surprise.
    But government bonds got a boost from an announcement by the
bank that it would launch the second phase of its programme to
boost market-based lending to small and medium-sized businesses.
    Under that programme, the central bank will offer interest
rate swaps, which commercial banks earlier widely used to hedge
government bond buying.
    Hungarian bond yields fell by 4-5 basis points along the
curve, with 10-year papers trading at 3.03 percent.
    The forint jumped to a 3-month high against the euro,
touching 307.20, and traded at 307.65 at 1423 GMT, up 0.3
percent, despite the central bank's dovish message.
    "Risk on is generally back now (in global markets), and with
that backdrop the forint is unable to weaken in the short term,"
one Budapest-based currency dealer said.
    The zloty firmed 0.5 percent to 4.1795 against the
euro.
    The Czech crown firmed slightly, after rebounding
from an early easing.
    While a pick-up in economic growth backs currencies across
the region, the crown could get more support from the central
bank's recent rhetoric than its regional peers, analysts said.
    The head of Erste Group Bank's Czech asset management
company said the Czech central bank (CNB) could be the first in
the region to start lifting interest rates.
    CNB board member Vojtech Benda told Reuters that low
interest rates boost housing prices into a spiral the bank will
need to slow.
    He said the timing of a rate hike could hinge on
third-quarter economic data and that more crown firming would
mean fewer hikes, although hikes are coming anyway.
 
    Bucharest's stock index hit a new 9-year high.
Sentiment has been lifted by an initial public offering and
listing by Digi Communications this month.
    Budapest's index shed 1.4 percent, mainly driven by
profit-taking which has pushed back the stocks of OTP Bank
 from 3-month highs reached on Monday.
    
                CEE MARKETS  SNAPSH   AT  1623 CET         
                             OT                      
                             CURRENCIES                    
                             Latest  Previo  Daily   Change
                                     us              
                             bid     close   change  in
                                                     2017
 Czech crown                 26.438  26.452   +0.05   2.15%
                                  0       0       %  
 Hungary                     307.65  308.55   +0.29   0.38%
 forint                          00      50       %  
 Polish zloty                4.1795  4.2014   +0.52   5.37%
                                                  %  
 Romanian leu                4.5515  4.5554   +0.09  -0.36%
                                                  %  
 Croatian kuna               7.4270  7.4305   +0.05   1.72%
                                                  %  
 Serbian dinar               122.62  122.88   +0.22   0.60%
                                 00      50       %  
 Note: daily    calculated   previo  close   1800          
 change         from         us      at      CET     
                             STOCKS                        
                             Latest  Previo  Daily   Change
                                     us              
                                     close   change  in
                                                     2017
 Prague                      1011.1  1007.9   +0.32   +9.72
                                  7       1       %       %
 Budapest                    34234.  34730.  -1.43%   +6.97
                                 24      94               %
 Warsaw                      2316.5  2307.8   +0.38   +18.9
                                  5       4       %      2%
 Bucharest                   8558.2  8508.2   +0.59   +20.7
                                  7       8       %      9%
 Ljubljana                   788.54  791.34  -0.35%   +9.89
                                                          %
 Zagreb                      1853.0  1850.8   +0.12  -7.11%
                                  4       6       %  
 Belgrade                    735.64  739.12  -0.47%   +2.55
                                                          %
 Sofia                       660.74  655.00   +0.88   +12.6
                                                  %      7%
                             BONDS                         
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
 Czech                                               spread
 Republic                                            
   2-year                    -0.182       0   +047b   +1bps
                                                 ps  
   5-year                    -0.019   0.003   +032b   +1bps
                                                 ps  
   10-year                    0.847       0   +045b   +0bps
                                                 ps  
 Poland                                                    
   2-year                     1.938  -0.019   +259b   -1bps
                                                 ps  
   5-year                     2.765  -0.006   +310b   +0bps
                                                 ps  
   10-year                    3.338   0.007   +294b   +1bps
                                                 ps  
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
                                                     interb
                                                     ank
 Czech Rep              <PR    0.37    0.46    0.54       0
                IBOR=>                               
 Hungary                <BU    0.19    0.22    0.29    0.16
                BOR=>                                
 Poland                 <WI   1.755   1.777   1.812    1.73
                BOR=>                                
 Note: FRA      are for ask                                
 quotes         prices                               
 **********************************************************
 ****
 
 (Editing by Ed Osmond)
  
 
 

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