June 13, 2019 / 10:17 AM / 4 months ago

CEE MARKETS-Czech crown gains; central banker says room for rate rise

    * Crown gains as rate-setter Benda sees room for rate
increase
    * Loose Fed, euro zone growth concern blurs CEE rate outlook
    * Hungarian rates jump on retail bond sale success

    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, June 13 (Reuters) - The crown gained on
Thursday after a Czech central bank board member said he still
saw room to raise interest rates. Other Central European
currencies fell. 
   The remarks by Czech policy-maker Vojtech Benda came in a
Bloomberg interview that followed similarly hawkish comments
made the governor of the central bank, Jiri Rusnok, on Tuesday.

    The outlook for Central European interest rates is unclear.
The Federal Reserve is expected to cut rates soon and the
European Central Bank might eventually follow suit. Central
Europe's economies are linked with both regions, especially the
euro zone. But surging wages are fuelling inflation in Central
Europe, putting pressure on its central banks to raise rates.
    The uncertainty over rates is the most visible in the Czech
Republic, where forward rate agreements price in rate
cuts, after eight rate increases since 2017.
    The crown rose to 25.58 versus the euro by 0844
GMT. The forint and the zloty each fell
0.1%.
    The leu continued to fall from five-month highs,
trading at 4.7245 versus the euro, after April figures showed
weak annual growth in industrial output and a widening in the
current account deficit in Romania. 
    The central bank is widely expected to fight inflation by
tightening liquidity in leu markets, but some analysts said
after Tuesday's higher-than-expected inflation data that the
bank may discuss a rate increase.
    In Hungary, the successful introduction of a new retail
government bond reduced forint liquidity, casting doubt on the
need of a further cut in the central bank's liquidity-creating
FX swaps at its meeting on June 25.
    The overnight BUBOR interbank interest rate has
quadrupled since last week, to 0.24 percent, rising above longer
maturities.
    Depressed Bund and U.S. Treasury yields, coupled with the
strong retail bond sales, can help Hungary's debt agency AKK to
lengthen the average maturity of its outstanding debt, traders
said.
    Government bond yields were mostly flat in the region.
Hungary's 10-year bond traded around 2.8%.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1044 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.5800   25.5820    +0.01%    +0.50%
 crown      >                                       
 Hungary    <EURHUF=  322.2500  322.0000    -0.08%    -0.36%
 forint     >                                       
 Polish     <EURPLN=    4.2605    4.2580    -0.06%    +0.68%
 zloty      >                                       
 Romanian   <EURRON=    4.7245    4.7235    -0.02%    -1.49%
 leu        >                                       
 Croatian   <EURHRK=    7.4170    7.4115    -0.07%    -0.09%
 kuna       >                                       
 Serbian    <EURRSD=  117.9800  118.0100    +0.03%    +0.27%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1054.36  1051.990    +0.23%    +6.87%
                                       0            
 Budapest             40764.97  40592.32    +0.43%    +4.15%
 Warsaw                2286.98   2282.80    +0.18%    +0.45%
 Bucharest             8577.98   8591.06    -0.15%   +16.17%
 Ljubljana  <.SBITOP    872.22    870.54    +0.19%    +8.45%
            >                                       
 Zagreb                1912.50   1912.85    -0.02%    +9.36%
 Belgrade   <.BELEX1    731.91    731.10    +0.11%    -3.91%
            5>                                      
 Sofia                  577.17    578.63    -0.25%    -2.91%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6860    0.0790   +235bps     +8bps
            R>                                      
   5-year   <CZ5YT=R    1.5020   -0.0230   +210bps     -2bps
            R>                                      
   10-year  <CZ10YT=    1.6230    0.0120   +187bps     +2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6380   -0.0260   +231bps     -2bps
            R>                                      
   5-year   <PL5YT=R    2.0120   -0.0140   +261bps     -1bps
            R>                                      
   10-year  <PL10YT=    2.5000   -0.0020   +275bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.15      2.05      1.96      2.17
            <PRIBOR=                                
            >                                       
 Hungary                  0.29      0.44      0.57      0.18
                                                    
 Poland                   1.75      1.72      1.71      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
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 (Additional reporting by Radu Marinas in Bucharest, editing by
Larry King)
  
 
 
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