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CEE MARKETS-Bond yields jump as U.S. data boost Fed rate hike odds
October 6, 2017 / 1:52 PM / 16 days ago

CEE MARKETS-Bond yields jump as U.S. data boost Fed rate hike odds

    * Polish 10-year bond yield trades at 6-and-1/2-month high
    * Romanian bonds lead jump on strong U.S. wage data
    * Romanian liquidity squeeze may remain, central bank
watched
    * Zloty, forint ease on selling due to dollar gains

 (Recasts with impact of U.S. figures)
    By Sandor Peto and Luiza Ilie
    BUDAPEST/BUCHAREST, Oct 6 (Reuters) - Central European debt
yields rose further on Friday after U.S. data showing a strong
rise in wages boosted expectations for a Federal Reserve rate
hike in December.
    Higher U.S. interest rates make debt yields in the European
Union's emerging markets relatively less attractive.
    "Core market yields rose a bit, while emerging market yields
kind of exploded," one Budapest-based fixed income trader said.
    The data also strengthened the dollar, and capital flows
into the greenback have tended to weaken the zloty and the
forint, Central Europe's most liquid currencies, in the past
weeks.
    The zloty eased 0.2 percent against the euro to
4.3115 by 1330 GMT. The forint shed 0.1 percent to
312.31. 
    The crown, buoyed by expectations that the Czech central
bank will further increase interest rates, was almost steady,
just like the leu which has been supported this week
by a liquidity squeeze in Romanian interbank markets.
    Romanian government bond yields, however, led the regionwide
rise. 
    Romania's government on Thursday rejected all bids at a bond
tender for the first time since March, unwilling to tolerate a
yield rise amid low demand.
    But expectations for a jump in the budget deficit late this
year and a rise in inflation have weighed on Romania's debt
market.
    Yields on the country's 2018- and 2019-expiry bonds, which
rose by 5-7 basis points in the morning, surged by further 10
basis points after the U.S. data, to 1.74 and 1.98 percent,
respectively.
    The 10-year bond yield, which was steady in early trade,
rose 7 basis points to 4.10 percent. Poland's corresponding
yield jumped 12 basis points to 3.50 percent, while Hungary's
10-year yield was up 9 basis points at 2.75 percent.
    Romania's three-month interbank rate was set at
1.78 percent, remaining near three-year highs, even though the
central bank injected 9.4 billion lei into the market through a
repo tender on Tuesday.
    The usual wage and other payments around Oct. 10 may not
ease the liquidity shortage because dividend payments by
state-owned companies and improved tax collection have pumped
lei out of markets. 
    A seasonal jump in government spending late in the year may
increase liquidity, but may also weigh on the leu,
which traded a touch off seven-week highs against the euro.
    Concern over a rise in the deficit may prompt Standard &
Poor's to revise the outlook for its rating for Romania to
negative in a review late on Friday, Raiffeisen said in a note.
    Czech bond yields rose by 4-6 basis points, with 10-year
bonds bid at 1.736 percent.   
               CEE MARKETS  SNAPSH   AT  1530 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.830  25.833   +0.01   4.56%
                                 0       5       %  
 Hungary                    312.31  311.94  -0.12%  -1.12%
 forint                         00      00          
 Polish zloty               4.3115  4.3023  -0.21%   2.14%
 Romanian leu               4.5750  4.5742  -0.02%  -0.87%
 Croatian                   7.5000  7.5060   +0.08   0.73%
 kuna                                            %  
 Serbian                    119.09  119.09   +0.00   3.58%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1060.5  1057.3   +0.30   +15.0
                                 9       9       %      8%
 Budapest                   37945.  37876.   +0.18   +18.5
                                80      47       %      7%
 Warsaw                     2470.0  2463.4   +0.27   +26.8
                                 5       5       %      0%
 Bucharest                  7970.3  7904.6   +0.83   +12.4
                                 2       2       %      9%
 Ljubljana                  799.73  801.09  -0.17%   +11.4
                                                        5%
 Zagreb                     1812.8  1800.9   +0.66  -9.12%
                                 7       8       %  
 Belgrade                   726.08  722.11   +0.55   +1.21
                                                 %       %
 Sofia                      676.88  672.93   +0.59   +15.4
                                                 %      2%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                     0.37   0.035   +105b   +2bps
                                                ps  
   5-year                    0.447   0.056   +068b   +3bps
                                                ps  
   10-year                   1.376   0.034   +088b   -1bps
                                                ps  
 Poland                                                   
   2-year                    1.746   0.024   +242b   +1bps
                                                ps  
   5-year                    2.793   0.087   +303b   +6bps
                                                ps  
   10-year                   3.503    0.11   +301b   +7bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.75    0.91    1.04       0
               IBOR=>                               
 Hungary               <BU    0.07    0.11    0.14    0.03
               BOR=>                                
 Poland                <WI   1.772   1.828   1.896    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting by Bartosz Chmielewski in Warsaw, editing
by Larry King)
  
 
 

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