August 2, 2018 / 9:09 AM / 4 months ago

CEE MARKETS-Czech crown sets 10-week high with interest rates expected to rise

    * Czech central bank seen delivering its fifth rate hike
    * Crown sets 10-week high, outperforming CEE peers
    * Richter helps Budapest stock index set four-week high

    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, Aug 2 (Reuters) - The Czech crown touched a
10-week high against the euro before the country's central bank
meeting on Thursday, when it is expected to raise interest rates
again to fight inflation.
    Markets have priced in a 25-basis-point rise, after
inflation exceeded the central bank's 2 percent target and the
crown weakened more than expected. The central bank has already
raised the benchmark rate four times since August 2017, most
recently in June.
    Investors also await signals about future rate tightening in
the central bank's new forecasts. The head of the bank's
monetary department has said the forecasts would raise the
prospect of several rate increases.
    The crown traded flat at 25.56 against the euro at
0749 GMT, off a 10-week high set at 25.548 in early trade.
    Other currencies in Central Europe and most of the region's
main stock indices weakened, reflecting a decrease in global
risk appetite, partly caused by the latest escalation in the
Sino-U.S. trade war.
    The forint and the leu eased about 0.1
percent versus the euro and the zloty shed 0.2
percent. 
    The yield on Czech five-year government bonds rose 6 basis
points to 1.783 percent. Interest rates in Czech markets have
been climbing up in the past days, but they seem to be running
out of steam, Komercni Banka traders said in a note.
    Hungary may not sell the full 10 billion forint of 20-year
government bonds to be offered on Thursday, but the five- and
10-year bonds offered at the auction could be fully sold, one
Budapest-based fixed income trader said.
    Yields may, however, rise slightly above the current
secondary market levels, 2.67 percent for the five-year debt and
3.24 percent for the 10-year bond, the trader added.
    The sale will test investors' appetite after a retreat in
yields as investors were closing earlier short positions in
forint markets, after a sell-off in the second quarter.
    Budapest's main equities index touched a four-week
high, driven by a 2 percent rise in shares of drug company
Richter, which released strong second-quarter results
today.    
            CEE       SNAPSHOT   AT                         
            MARKETS             0949 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.5600   25.5600    +0.00%    -0.07%
 crown      >                                       
 Hungary    <EURHUF=  321.1300  320.7100    -0.13%    -3.18%
 forint     >                                       
 Polish     <EURPLN=    4.2714    4.2630    -0.20%    -2.23%
 zloty      >                                       
 Romanian   <EURRON=    4.6210    4.6185    -0.05%    +1.27%
 leu        >                                       
 Croatian   <EURHRK=    7.4040    7.4063    +0.03%    +0.36%
 kuna       >                                       
 Serbian    <EURRSD=  117.8900  118.0400    +0.13%    +0.52%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1089.75  1089.510    +0.02%    +1.07%
                                       0            
 Budapest             36184.88  36207.72    -0.06%    -8.11%
 Warsaw                2307.45   2315.48    -0.35%    -6.25%
 Bucharest             8010.11   8012.24    -0.03%    +3.31%
 Ljubljana  <.SBITOP    887.40    887.61    -0.02%   +10.05%
            >                                       
 Zagreb                1810.23   1811.04    -0.04%    -1.77%
 Belgrade   <.BELEX1    742.29    743.50    -0.16%    -2.30%
            5>                                      
 Sofia                  634.68    634.68    +0.00%    -6.31%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.2960    0.0230   +186bps     +4bps
            R>                                      
   5-year   <CZ5YT=R    1.7830    0.0590   +194bps     +7bps
            R>                                      
   10-year  <CZ10YT=    2.2260    0.0040   +175bps     +2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6120   -0.0050   +218bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.5150   -0.0020   +267bps     +1bps
            R>                                      
   10-year  <PL10YT=    3.1530   -0.0060   +268bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.44      1.65      1.77      1.23
            <PRIBOR=                                
            >                                       
 Hungary                  0.35      0.54      0.75      0.16
                                                    
 Poland                   1.74      1.77      1.82      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
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 (Reporting by Sandor Peto and Jason Hovet, editing by Larry
King)
  
 
 
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