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CEE MARKETS-Crown slides as inflation slows, other currencies firm
May 10, 2017 / 9:14 AM / 6 months ago

CEE MARKETS-Crown slides as inflation slows, other currencies firm

    * Crown reverses firming after bigger-than-expected CPI
slowdown
    * Hungarian data confirm that inflation retreated in CEE
    * Hungarian debt yields drop, mainly at long end of curve
    * Polish bank stocks give up some ground after surge

 (Adds forint and zloty firming and retreat of Polish bank
stocks)
    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, May 10 (Reuters) - The Czech crown reversed
some early strengthening and Hungarian government bonds firmed
on Wednesday after the two countries released
lower-than-anticipated inflation figures for April.
    Slower inflation in the region reduces the odds that central
bank monetary tightening could start any time soon after years
of interest rate cuts and measures to boost market liquidity.
    After a year of almost unbroken rises, Czech annual
inflation dropped to the central bank's (CNB) 2 percent target
in April. It was below analysts' consensus forecast, just like
Hungary's figure, which dropped to 2.2 percent from 2.7 percent
in March.
    A retreat of volatile fuel and food prices caused the
slowdown already indicated by Polish data released earlier.
    The crown firmed to a one-month high of 26.565 per
euro in early trade, but after the data it sharply retreated.
    At 1215 GMT, it traded at 26.645, a shade weaker from
Tuesday.
    "(The data) is an argument for the central bank to not be in
a dramatic hurry to hike interest rates in the upcoming months
and to stay in the wait-and-see mode for a longer period,"
Patria Finance economist Jan Bures said.
    Signs of a pick-up in core inflation means "the chance of
raising rates in the second half of the year will stay for the
CNB board a relevant topic, especially if the crown does not
firm from current levels," said Radomir Jac, chief economist at
General Investments CEE.
    The bank said earlier that the likelihood of rate hikes
could rise if the crown does not firm from 27, the level of a
cap removed by the CNB 5 weeks ago.
    The forint and the zloty firmed 0.2-0.3
percent as investors continued to reverse selling positions
opened before France's presidential elections on Sunday.
    Hungarian medium-and long-term government bond yields
dropped by about 10 basis points, with 10-year papers trading at
3.06 percent, down 9 basis points from Tuesday's fixing.
    "If inflation remains low, it is possible that the central
bank rate hikes expected for next year will be delayed to 2019,"
one trader said. 
    Other data released on Wednesday showed 10.9 percent annual
surge in Czech industrial output in March, and 0.8 percent rise
in Slovenia.
    In equities markets, Polish bank stocks gave up some of the
strong gains they posted on Tuesday after good earnings reports.
    The index of Warsaw-listed banks touched a 2-year
high, before profit-taking knocked it down by 1.6 percent
compared to Tuesday, even though Bank Pekao reported
bigger-than-expected rise in its first-quarter net profit.
   
             CEE        SNAPS   AT  1415          
             MARKETS    HOT    CET           
                        CURRENCIES                
                        Lates  Previ  Daily  Chang
                        t      ous           e
                        bid    close  chang  in
                                      e      2017
 Czech                  26.64  26.64  -0.02  1.36%
 crown                     50     00      %  
 Hungary                310.5  311.4   +0.2  -0.56
 forint                   700    600     9%      %
 Polish                 4.217  4.226   +0.2  4.41%
 zloty                      9      7     1%  
 Romanian               4.549  4.549   +0.0  -0.32
 leu                        5      9     1%      %
 Croatian               7.423  7.418  -0.07  1.77%
 kuna                       5      5      %  
 Serbian                123.0  123.1   +0.0  0.25%
 dinar                    400    350     8%  
 Note:       calculate  previ  close  1800        
 daily       d from     ous    at     CET    
 change                                      
                        STOCK                     
                        S                    
                        Lates  Previ  Daily  Chang
                        t      ous           e
                               close  chang  in
                                      e      2017
 Prague                 1011.  1010.   +0.0   +9.7
                           33     96     4%     4%
 Budapest               33617  33509   +0.3   +5.0
                          .08    .99     2%     4%
 Warsaw                 2390.  2413.  -0.94   +22.
                           77     53      %    73%
 Bucharest              8331.  8315.   +0.1   +17.
                           37     70     9%    59%
 Ljubljana              780.8  780.6   +0.0   +8.8
                            3      3     3%     1%
 Zagreb                 1885.  1897.  -0.60  -5.46
                           90     23      %      %
 Belgrade    <.BELEX15  727.2  715.0   +1.7   +1.3
             >              6      4     1%     8%
 Sofia                  660.4  659.8   +0.0   +12.
                            5      9     8%    62%
                        BONDS                     
                        Yield  Yield  Sprea  Daily
                                      d      
                        (bid)  chang  vs     chang
                               e      Bund   e in
 Czech                                       sprea
 Republic                                    d
   2-year    <CZ2YT=RR  -0.04  0.087   +062   +8bp
             >              6           bps      s
   5-year    <CZ5YT=RR  0.013  -0.01   +032   +0bp
             >                     8    bps      s
   10-year   <CZ10YT=R  0.818      0   +041   +3bp
             R>                         bps      s
 Poland                                           
   2-year    <PL2YT=RR  1.997  0.008   +266   +0bp
             >                          bps      s
   5-year    <PL5YT=RR  2.875  -0.00   +319   +1bp
             >                     9    bps      s
   10-year   <PL10YT=R  3.433  -0.01   +303   +1bp
             R>                    9    bps      s
             FORWARD    RATE   AGREEMENT          
                        3x6    6x9    9x12   3M
                                             inter
                                             bank
 Czech Rep           <   0.34    0.4   0.49      0
             PRIBOR=>                        
 Hungary             <   0.21   0.28   0.38   0.16
             BUBOR=>                         
 Poland              <  1.754   1.79   1.84   1.73
             WIBOR=>                         
 Note: FRA   are for                              
 quotes      ask                             
             prices                          
 *************************************************
 *************
 
 (Additional reporting by Bartosz Chmielewski in Warsaw; editing
by Jeremy Gaunt)
  
 
 

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