October 4, 2018 / 9:50 AM / in 17 days

CEE MARKETS-Assets fall on prospect of Fed hikes, forint gives up ground

    * Dollar rise, Fed comments weigh on CEE asset prices
    * Forint, a recent outperformer, leads fx easing
    * Hungarian, Polish bond yields rise by about 5 bps

    By Sandor Peto
    BUDAPEST, Oct 4 (Reuters) - Central European asset prices
eased on Thursday as upbeat U.S. economic data and optimistic
comments from Federal Reserve Chairman Jerome Powell triggered
dollar buying.  
    After strong services sector and jobs data, Powell said the
Fed may raise interest rates above an estimated "neutral" level.
    Higher U.S. interest rates make assets in emerging markets
relatively less attractive.
    The forint led currency losses in Central Europe.
    It shed 0.4 percent, to trade at 323.7 against the euro at
0801 GMT, while the crown shed 0.2 percent and the
zloty 0.1 percent.
    The forint gave up some of its gains of recent weeks versus
regional peers, retreating from 1-and-1/2-month highs set
against both the euro and the zloty on Wednesday, and
from the proximity of 2-month highs versus the crown.
    In a Reuters poll of analysts conducted before the U.S.
data, analysts predicted a 3 percent gain for the crown against
the euro in the next 12 months, driven by expected further Czech
central bank rate hikes, and about one percent forint and zloty
firming.
    According to a separate survey, the dollar could firm
slightly further, to $1.14 versus the euro in the next three
months but shed 6 percent in a year.
    The dollar traded at 1.1485 against the euro on Thursday,
and investors pondered if the U.S. news could change the
longer-term market outlook.
    "It is hard to say if we can expect a change in market
trends," one Budapest-based fixed income trader said. "Anyway,
10 basis point movements in core market (U.S.) yields are rare,
and we are obviously tracking it," the trader added.
    The U.S. 10-year Treasury yield retreated by about 5 basis
points by Thursday after an overnight spike to 3.2325 percent,
its highest level since 2011.
    But euro zone and Central European bond yields rose.
    Medium- and long-term yields in Budapest and Warsaw rose by
about 5 basis points, with Hungary's 10-year bond trading at
3.63 percent and its Polish peer at 3.31 percent, its highest
level since May.
    In stock markets, Budapest's main index dropped 0.6
percent, retreating from Wednesday's 4-week highs, and Warsaw
 shed 0.8 percent.
    Prague's main equities index resisted, rising a
quarter of a percent, driven by a 1.5 percent rise in the stocks
of Austria-based bank Erste.
    Elsewhere, Serbia's dinar firmed slightly to
118.52 against the euro.
    The Serbian central bank, which keeps the dinar in tight
ranges, sold euros in the market on Wednesday to support it.
    The dinar came under pressure as Serbia's debt management
agency decided to skip selling auctions for the rest of the year
and even plans two buyback tenders, Raiffeisen analysts said in
a note.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1001 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7500   25.7010    -0.19%    -0.81%
 crown      >                                       
 Hungary    <EURHUF=  323.7000  322.4000    -0.40%    -3.95%
 forint     >                                       
 Polish     <EURPLN=    4.3025    4.2985    -0.09%    -2.93%
 zloty      >                                       
 Romanian   <EURRON=    4.6670    4.6663    -0.01%    +0.27%
 leu        >                                       
 Croatian   <EURHRK=    7.4245    7.4315    +0.09%    +0.08%
 kuna       >                                       
 Serbian    <EURRSD=  118.5200  118.5700    +0.04%    -0.02%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1110.06  1107.280    +0.25%    +2.96%
                                       0            
 Budapest             37000.36  37212.94    -0.57%    -6.04%
 Warsaw                2278.84   2298.20    -0.84%    -7.41%
 Bucharest             8492.24   8490.84    +0.02%    +9.52%
 Ljubljana  <.SBITOP    841.97    841.91    +0.01%    +4.41%
            >                                       
 Zagreb                1777.24   1780.89    -0.20%    -3.56%
 Belgrade   <.BELEX1    729.27    729.50    -0.03%    -4.02%
            5>                                      
 Sofia                  622.17    622.17    +0.00%    -8.16%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6500    0.1560   +219bps    +14bps
            R>                                      
   5-year   <CZ5YT=R    1.7640    0.0110   +185bps     -3bps
            R>                                      
   10-year  <CZ10YT=    2.1080    0.0230   +158bps     -3bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6010    0.0450   +214bps     +3bps
            R>                                      
   5-year   <PL5YT=R    2.5930    0.0300   +268bps     -1bps
            R>                                      
   10-year  <PL10YT=    3.3080    0.0520   +278bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.01      2.18      2.31      1.73
            <PRIBOR=                                
            >                                       
 Hungary                  0.39      0.67      0.93      0.16
                                                    
 Poland                   1.77      1.80      1.87      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
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 (Reporting by Sandor Peto)
  
 
 
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