June 25, 2018 / 9:38 AM / 8 months ago

CEE MARKETS-Czech crown eases slightly despite some rate hike bets

    * Global risk aversion weighs on CEE currencies, stocks
    * Some market participants see Czech rate hike Wednesday
    * Hungary's forint, bonds stabilise after weakening

    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, June 25 (Reuters) - Central Europe's main
currencies and equities mostly eased in slow trade on Monday as
trade tension between the United States and its partners weighed
on risk appetite in global markets.
    The crown eased less than 0.1 percent to 25.82
against the euro by 0831 GMT, two days before a meeting of the
Czech central bank (CNB) at which interest rates may be raised.
    The bank started to reverse years of monetary easing in
August last year as a surge in wages due to tight labour markets
has increased inflation in the region.
    But Czech consumer sentiment eased slightly in June
according to data released on Monday. The Ifo
business climate index of Germany, Central Europe's biggest
trade partner, also eased in June.
    A rally of the dollar and U.S. yields in the past months has
led to a weakening of regional currencies, including the crown,
increasing the odds of further hikes in CNB rates.
    "Rate setters definitely dislike the current, rather weak
koruna (crown)," Erste analysts said in a note, adding however
that a hike in August is more likely than at the bank's next
meeting on Wednesday.    
    Markets are still split on the chances that the next hike
could come already at Wednesday's meeting, where hawkish rate
setter Mojmir Hampl will not be present.
    "Even with the biggest of the (hawks on the board) ...
missing, we believe the hawkish wing will win and rates will go
up by 25 bps," CSOB analysts said in a client note, noting the
crown is around 3 percent weaker than the CNB outlook assumed. 
    The bank's benchmark rate stands at 0.75 percent.
    Elsewhere in the region, Hungary's central bank signalled an
eventual end to its ultra-loose policies last week after a surge
in its long-term bond yields and a weakening of the forint
. The forint traded steady at 324.73 against the euro.
    "We project a bit more stability and see some modest yield
tightening possible on long-end HGBs (Hungarian government
bonds) if global risk aversion is tamed this week," Raiffeisen
analysts said in a note.
    Hungarian bonds were steady, while regional peers were
    Romanian bond yields were bid higher by a few basis points.
    Political wrangling over corruption in Romania may even help
government bonds as it could make the country's central bank
more cautious in monetary tightening, the Raiffeisen note said.
    Senior members of the ruling Social Democrats expressed
undimmed support for their leader on Friday after a preliminary
Supreme Court ruling sentenced the country's most powerful
politician to prison for corruption. 
    Bucharest's main equities index fell by over one
percent, dragged down by a 12 percent fall in the stock of
state-owned gas pipeline operator Transgaz, which
started to trade without dividend.
               CEE MARKETS  SNAPSH   AT  1031 CET         
                            Latest  Previo  Daily   Change
                            bid     close   change  in
 Czech crown                25.820  25.806  -0.05%  -1.13%
                                 0       5          
 Hungary                    324.73  324.70  -0.01%  -4.37%
 forint                         00      50          
 Polish zloty               4.3200  4.3181  -0.04%  -3.34%
 Romanian leu               4.6644  4.6628  -0.03%   0.27%
 Croatian                   7.3770  7.3795   +0.03   0.69%
 kuna                                            %  
 Serbian                    118.00  118.08   +0.07   0.34%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            Latest  Previo  Daily   Change
                                    close   change  in
 Prague                     1068.2  1064.1   +0.39  -0.92%
                                 2       2       %  
 Budapest                   35141.  35396.  -0.72%  -10.76
                                33      62               %
 Warsaw                     2171.2  2162.8   +0.39  -11.78
                                 6       8       %       %
 Bucharest                  8024.7  8108.8  -1.04%   +3.49
                                 3       4               %
 Ljubljana                    0.00  886.75   +0.00  -100.0
                                                 %      0%
 Zagreb                     1838.5  1831.8   +0.37  -0.24%
                                 1       2       %  
 Belgrade                   732.30  729.87   +0.33  -3.62%
 Sofia                      634.31  630.81   +0.55  -6.37%
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
   2-year                    1.072   0.006   +176b   +0bps
   5-year                    1.594  -0.003   +190b   +0bps
   10-year                   2.203  -0.012   +188b   +0bps
   2-year                    1.644   0.014   +234b   +1bps
   5-year                    2.512   0.003   +282b   +1bps
   10-year                   3.175   0.034   +285b   +4bps
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
 Czech Rep             <PR    1.17    1.29    1.43  #N/A
 Hungary               <BU    0.77   0.965    1.16    0.26
 Poland                <WI    1.75    1.76    1.81     1.7
 Note: FRA     are for ask                                
 quotes        prices                               
 (Reporting by Sandor Peto
Editing by Mark Heinrich)
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