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CEE MARKETS-Currencies firm ahead of Polish CPI, Czech rate meeting
October 31, 2017 / 10:26 AM / 19 days ago

CEE MARKETS-Currencies firm ahead of Polish CPI, Czech rate meeting

    * Polish CPI, due at 1300 GMT, is seen showing mild retreat
    * Polish FRAs still price in central bank rate hike in 12
months
    * Hungarian central bank launches quoting for 6-month BUBOR
    * Figures show foreigners further boosted Czech bond holding

    By Sandor Peto and Bartosz Chmielewski
    BUDAPEST/WARSAW, Oct 31 (Reuters) - Central European
currencies firmed slightly ahead of an expected drop in Polish
October inflation figures due later on Tuesday that would still
underpin expectations for central bank rate hikes in Prague and
Warsaw.
    The zloty and the Czech crown firmed 0.1
percent against the euro by 0916 GMT, to 4.243 and 25.64,
respectively.
    Analysts expect a drop in annual inflation to 2.1 percent
from September's 2.2 percent, still keeping Polish inflation
near its highest since 2012.
    Polish central bank (NBP) governor Adam Glapinski has
projected unchanged interest rates this year and next, but
markets have priced in an earlier reversal in the past years'
rate cuts. 
    Forward rate agreements price in 25 basis point hike in the 
1.5 percent key rate for the next 12 months.
    "The preliminary CPI data could have an impact on Polish
assets, but the expected slowdown would probably strengthen the
dovish fraction of the NBP," Bank Millennium analysts said in a
note.
   Analysts at Raiffeisen said in a note that inflation in
Poland "might return below 2 percent at year-end owing to base
effects only to reaccelerate in 2018." This would support their
forecasts of a beginning of rate hikes in mid-2018, they said. 
    A strengthening of rate hike expectations could be positive
for the zloty and send bond yields higher. Polish yields were
steady, while Hungarian yields rose one basis points along the
curve, tracking euro zone and U.S. peers. 
    In contrast to the Polish and Czech central banks, Hungary's
loosening of its monetary policy was further underpinned by its
announcement on Tuesday to extend mandatory quotation to the
six-month BUBOR interbank rates <BUBOR).
    "It can push the rate lower by a few basis points (from 0.07
percent)," one Budapest-based trader said, adding that the bank
would need further measures to meet its goal to push long-term 
yields lower.
    A Reuters poll showed analysts expect the Czech central
bank, which began raising interest rates in August, could lift
its 0.25 percent two-week repo rate again on Thursday. All but
one of 16 analysts said they expected a 25 basis point hike.

    Government figures published on Tuesday showed foreign
investors had nearly doubled their Czech domestic government
bond holdings in September compared to a year earlier,
increasing the risk of a sell-off if investors no longer expect
a strengthening of the crown.
    The Raiffeisen analysts still turned their "sell"
recommendation for Czech bonds into "hold", saying a rise in
Czech yields has led to a decent premium over Bund yields. The
latest comments from the European Central Bank signalled Bund
yields could stay "at depressed levels for longer", they said. 
     
               CEE MARKETS  SNAPSH   AT  1016 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.640  25.666   +0.10   5.33%
                                 0       0       %  
 Hungary                    311.20  311.28   +0.03  -0.76%
 forint                         00      00       %  
 Polish zloty               4.2430  4.2473   +0.10   3.79%
                                                 %  
 Romanian leu               4.5980  4.5983   +0.01  -1.37%
                                                 %  
 Croatian                   7.5200  7.5225   +0.03   0.47%
 kuna                                            %  
 Serbian                    119.17  119.32   +0.13   3.51%
 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                     1066.8  1064.0   +0.27   +15.7
                                 9       0       %      6%
 Budapest                   39856.  39881.  -0.06%   +24.5
                                15      22              4%
 Warsaw                     2507.5  2517.0  -0.38%   +28.7
                                 1       3              3%
 Bucharest                  7815.4  7845.5  -0.38%   +10.3
                                 0       1              1%
 Ljubljana                  796.92  796.53   +0.05   +11.0
                                                 %      6%
 Zagreb                     1885.9  1881.0   +0.26  -5.46%
                                 2       1       %  
 Belgrade                   727.58  726.16   +0.20   +1.42
                                                 %       %
 Sofia                      672.01  669.99   +0.30   +14.5
                                                 %      9%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.439   0.142   +119b   +14bp
                                                ps       s
   5-year                    0.794   0.036   +114b   +3bps
                                                ps  
   10-year                   1.568  -0.045   +120b   -5bps
                                                ps  
 Poland                                                   
   2-year                    1.611  -0.004   +236b   -1bps
                                                ps  
   5-year                    2.668   0.012   +302b   +1bps
                                                ps  
   10-year                   3.444   0.018   +308b   +2bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.85    1.06    1.18       0
               IBOR=>                               
 Hungary               <BU    0.09    0.07     0.1    0.03
               BOR=>                                
 Poland                <WI   1.771    1.85    1.94    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Reporting by Sandor Peto; Editing by Raissa Kasolowsky)
  
 
 

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