September 27, 2018 / 2:56 PM / 2 months ago

CEE MARKETS-Crown, leu set multi-week lows as dollar firms

    * Crown, leu eases further as dollar strengthens
    * Hungary sells more bonds than planned at auction
    * German inflation surprise weighs on CEE bonds

 (Recasts with crown, leu weakening, Hungarian bond auction)
    By Sandor Peto
    BUDAPEST, Sept 27 (Reuters) - The crown and the leu weakened
on Thursday as the dollar rallied, a day after the Czech
central bank (CNB) increased its rate but disappointed investors
who had also expected it to promise one more hike this year.
    An unexpected jump in German inflation in September weighed
on the region's government bonds, which mostly reversed an early
decline in yields.
    The Czech crown hit a 3-week low against the euro
- it was 0.1 percent lower on the day at 25.715 by 1354 GMT.
    That came on top of declines on Wednesday, after CNB
Governor Jiri Rusnok said it was likely the bank would raise
rates again this year, but stopped short of a definite promise
and said it could also happen early next year.
    That disappointed traders who have already priced in a hike
this year.
    The leu touched a 3-month low against the euro,
down 0.2 percent on the day at 4.667.
    The Romanian currency, which has outperformed regional peers
earlier this year, has gradually lost ground in recent weeks.
    The Romanian central bank increased its rates twice this
year, but many market participants do not expect it to increase
them further earlier than next year as annual inflation is seen
retreating fast in the next month from June's 5.4 percent.    
    The forint eased only a shade, and stayed in the
past weeks' narrow ranges around 323.63.
    The currency and government bonds may have got some support
from Hungary's sale of euro-denominated bonds worth one billion
euros on Tuesday in a strongly oversubscribed issue, one
Budapest-based fixed income trader said.
    At its bi-weekly forint-denominated bond auction the
Hungarian government sold bonds worth 80 billion forints 
($289.06 million), well above its 50 billion forint original
offer.
    The bonds were sold at average yields below Wednesday's
secondary market levels, but yields rose slightly after the
auction, reversing an early drop.
    "That was a reaction to higher-than-expected German
inflation, which fitted in with (European Central Bank chief
Mario) Draghi's earlier comments on stronger inflation," the
trader said.
    Hungarian 5-year bonds traded at a yield of 3 percent, up
from their 2.96 percent auction level, but still lower that the
3.03 percent hit late on Wednesday.
    Poland's corresponding bond yield rose 1 basis point to 2.55
percent.
    The Czech 10-year yield was bid lower by 5 basis
points at 1.16 percent, retreating after setting a
4-and-1/2-year high on Wednesday.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1554 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7150   25.6880    -0.10%    -0.67%
 crown      >                                       
 Hungary    <EURHUF=  323.6300  323.5100    -0.04%    -3.93%
 forint     >                                       
 Polish     <EURPLN=    4.2735    4.2776    +0.10%    -2.27%
 zloty      >                                       
 Romanian   <EURRON=    4.6670    4.6595    -0.16%    +0.27%
 leu        >                                       
 Croatian   <EURHRK=    7.4300    7.4272    -0.04%    +0.00%
 kuna       >                                       
 Serbian    <EURRSD=  118.2500  118.4700    +0.19%    +0.21%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1099.79  1100.770    -0.09%    +2.01%
                                       0            
 Budapest             36397.87  35996.04    +1.12%    -7.57%
 Warsaw                2305.67   2304.45    +0.05%    -6.32%
 Bucharest             8427.76   8374.90    +0.63%    +8.69%
 Ljubljana  <.SBITOP    834.95    840.05    -0.61%    +3.54%
            >                                       
 Zagreb                1787.53   1790.04    -0.14%    -3.00%
 Belgrade   <.BELEX1    727.47    725.74    +0.24%    -4.26%
            5>                                      
 Sofia                  623.15    623.10    +0.01%    -8.02%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6170    0.1040   +214bps    +11bps
            R>                                      
   5-year   <CZ5YT=R    1.8700    0.0010   +196bps     +1bps
            R>                                      
   10-year  <CZ10YT=    2.1600   -0.0450   +165bps     -2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5640    0.0000   +209bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.5690    0.0240   +266bps     +3bps
            R>                                      
   10-year  <PL10YT=    3.2690    0.0270   +276bps     +5bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.97      2.13      2.23      1.70
            <PRIBOR=                                
            >                                       
 Hungary                  0.40      0.63      0.90      0.18
                                                    
 Poland                   1.77      1.79      1.84      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 *************                                      
 
    


($1 = 276.7600 forints)

    
 (Reporting by Sandor Peto; Editing by Toby Chopra and Andrew
Heavens)
  
 
 
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