September 11, 2018 / 10:37 AM / 3 months ago

CEE MARKETS-Bond yields rise after higher-than-expected CPI figures

    * Hungary, Romania Aug CPI come in higher than forecast
    * Government bond yields rise, also tracking Bunds 
    * Budapest, Bucharest cbanks watched after CPI surprise

    By Sandor Peto
    BUDAPEST, Sept 11 (Reuters) - Central European government
bond yields rose on Tuesday after higher-than-expected August
inflation figures from the region, and as Bund yields also
increased.
     After data on Monday showed a bigger-than-forecast pick-up
in Czech inflation in August, Romania's and Hungary's figures
also came in above expectations on Tuesday.
     Hungary's headline inflation was unchanged at 3.4 percent,
supported by rising food prices. Analysts said that may mean
inflation will hold above 3 percent - the midpoint of the
central bank's (NBH) 2-4 percent target range - for the rest of
the year.    
     The NBH is unlikely to change record low interest rates at
its meeting next Tuesday, when it will also discuss its
quarterly inflation report, but it may disclose some details of
future policy tightening, market participants said.
    "September meetings usually offer a good opportunity if they
want to communicate a change in policy," one Budapest-based
fixed income trader said.
    Hungarian government bond yields rose 2-5 basis points
relative to Monday's fixing, with the curve
steepening and 10-year paper trading at 3.52 percent.
    Corresponding Bund yields rose about 2 basis points to a
5-week high as growing hopes of fiscal restraint in Italy and a
deal for Britain's exit from the EU eroded demand for safe-haven
debt.
    Hungarian yields have risen 15-20 basis points in the past
three weeks, luring back foreign buyers. Their Hungarian bond
holdings rose last week to the highest level since
January 2016.
    In contrast, Romania's 10-year bond yield has fallen more
than 50 basis points since late June as inflation fell sharply
to 4.6 percent in July from a 5-year high of 5.4 percent in
June, contributing to less hawkish rhetoric from the central
bank.    
    Comments from the Romanian central bank will be closely
watched after Tuesday's data showed inflation rose to 5.1
percent in August, above analysts' 4.8 percent forecasts. Core
inflation was little changed.
    "We think that disinflation will resume in September but our
forecast about an inflation rate of 3.5 percent in December is
at risk after today's data," Erste analyst Eugen Sinca said in a
note.
    The yield on Romania's 10-year government paper was bid
higher by 2 basis points at 4.87 percent.
    The leu eased by 0.1 percent to 4.6326 against the
euro by 0950 GMT.
    Other Central European currencies gave up the gains they
posted earlier in the session when the dollar was
retreating. The greenback's firming periods have often caused
selling in the region's currency markets this year.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1150 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.6470   25.6300    -0.07%    -0.41%
 crown      >                                       
 Hungary    <EURHUF=  324.5500  324.5100    -0.01%    -4.20%
 forint     >                                       
 Polish     <EURPLN=    4.3128    4.3151    +0.05%    -3.16%
 zloty      >                                       
 Romanian   <EURRON=    4.6325    4.6263    -0.13%    +1.02%
 leu        >                                       
 Croatian   <EURHRK=    7.4210    7.4215    +0.01%    +0.13%
 kuna       >                                       
 Serbian    <EURRSD=  118.3500  118.3700    +0.02%    +0.13%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1080.15  1082.850    -0.25%    +0.18%
                                       0            
 Budapest             36823.56  37202.89    -1.02%    -6.49%
 Warsaw                2244.51   2270.83    -1.16%    -8.80%
 Bucharest             8318.38   8331.45    -0.16%    +7.28%
 Ljubljana  <.SBITOP    861.05    863.09    -0.24%    +6.78%
            >                                       
 Zagreb                1792.88   1797.95    -0.28%    -2.71%
 Belgrade   <.BELEX1    722.49    722.41    +0.01%    -4.91%
            5>                                      
 Sofia                  628.19    628.80    -0.10%    -7.27%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.5020    0.0320   +205bps     +3bps
            R>                                      
   5-year   <CZ5YT=R    1.8040    0.0310   +200bps     +2bps
            R>                                      
   10-year  <CZ10YT=    2.1550    0.0110   +174bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6440    0.0100   +219bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.5950    0.0000   +280bps     -1bps
            R>                                      
   10-year  <PL10YT=    3.2850    0.0170   +287bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.91      2.08      2.19      1.52
            <PRIBOR=                                
            >                                       
 Hungary                  0.60      0.81      1.03      0.21
                                                    
 Poland                   1.77      1.79      1.85      1.71
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 (Reporting by Sandor Peto; Editing by Kirsten Donovan)
  
 
 
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