February 26, 2019 / 3:32 PM / 3 months ago

CEE MARKETS-Currencies firm on hawkish comments, possible Brexit delay

    * Hungarian central bank gets to brink of tightening, forint
firms
    * Dollar easing, possible Brexit delay help currencies,
bonds
    * No-deal Brexit is two-way risk to CPI-Czech rate setter
Holub

 (Recasts, with Hungarian central bank statement, easing Brexit
fears)
    By Sandor Peto
    BUDAPEST, Feb 26 (Reuters) - Central European currencies
mostly firmed on Tuesday, helped by hawkish comments from the
National Bank of Hungary (NBH) and hopes that Britain will not
leave the European Union (Brexit) without a deal on March 29.
    The NBH kept interest rates on hold as expected, but it
reiterated that it was ready to start gradual policy tightening
if inflation trends justify.
    Analysts said the banks' comments indicated that tightening
could start at its next meeting, in March, when it also
discusses it quarterly inflation report.
    "In the first stage of normalization... the NBH could
influence market interest rates by tightening liquidity," CIB
analysts said in a note.
    A cut in the NBH's fx swap facility could slowly increase
the 3-month BUBOR rate, now at 0.15 percent, to the
NBH's base rate, analysts said.
    The forint and the zloty firmed in
tandem by a third of a percent against the euro by 1441 GMT,
while Romania's leu gained 0.1 percent.
    The forint touched its strongest level since Feb. 1, at
316.65, before retreating to 316.9, while the zloty, trading at
4.3233 remained weaker than its 200-day moving average of 4.3.
    "The forint has no reason to weaken (after the central bank
comments), while comments from abroad suggesting a delay in
Brexit or a new British referendum are generally positive for
markets," the dealer said, adding that a mild weakening of the
dollar index was also positive.
    British Prime Minister Theresa May on Tuesday offered
lawmakers the chance to vote in just over two weeks' time on
whether to delay leaving the EU.
    A disorderly exit, without a deal with the EU, remains a
worry.
    The Czech central bank will hold its next meeting on March
28, a day before the official Brexit date.
    One of its rate setters, Tomas Holub, said on Tuesday that
Brexit without a deal would have two-way impact on inflation,
and the bank should wait to see how that plays out. (nP7N1XX00Q)
    The comments discouraged bets for a rate hike at the March
meeting. The crown eased 0.1 percent to 25.67 versus the euro,
bucking the strengthening of regional peers. 
    Stock indices stayed in the red in the region, tracking a
retreat in Asian equities.
    Polish government bond yields dropped by 1-2 basis points
after a surge on Monday as the ruling Law and Justice party
(PiS), preparing for elections, promised a big increase in
public spending.
    The 10-year Polish bond yield dropped by 2 basis point to
2.77 percent, after Monday's 13 basis-point jump.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1541 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6700   25.6420    -0.11%    +0.14%
 crown      >                                       
 Hungary    <EURHUF=  316.9000  317.9500    +0.33%    +1.32%
 forint     >                                       
 Polish     <EURPLN=    4.3233    4.3375    +0.33%    -0.78%
 zloty      >                                       
 Romanian   <EURRON=    4.7620    4.7655    +0.07%    -2.27%
 leu        >                                       
 Croatian   <EURHRK=    7.4260    7.4295    +0.05%    -0.22%
 kuna       >                                       
 Serbian    <EURRSD=  118.0400  118.2100    +0.14%    +0.22%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1062.64  1070.680    -0.75%    +7.71%
                                       0            
 Budapest             40536.87  40987.95    -1.10%    +3.57%
 Warsaw                2360.82   2371.69    -0.46%    +3.70%
 Bucharest             7742.48   7772.07    -0.38%    +4.86%
 Ljubljana  <.SBITOP    844.39    845.26    -0.10%    +4.99%
            >                                       
 Zagreb                1784.54   1781.52    +0.17%    +2.04%
 Belgrade   <.BELEX1    680.12    683.59    -0.51%   -10.71%
            5>                                      
 Sofia                  591.12    593.05    -0.33%    -0.56%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.8290    0.0420   +238bps     +4bps
            R>                                      
   5-year   <CZ5YT=R    1.8520    0.0480   +222bps     +5bps
            R>                                      
   10-year  <CZ10YT=    1.9130   -0.0030   +181bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6140   -0.0040   +217bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.2410   -0.0250   +261bps     -2bps
            R>                                      
   10-year  <PL10YT=    2.8490   -0.0430   +275bps     -4bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.26      2.31      2.32      2.02
            <PRIBOR=                                
            >                                       
 Hungary                  0.36      0.59      0.78      0.15
                                                    
 Poland                   1.73      1.73      1.74      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
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 (Reporting by Sandor Peto, editing by Ed Osmond)
  
 
 
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