November 9, 2017 / 12:56 PM / a year ago

CEE MARKETS-Czech crown surges on CPI rise, Hungarian bonds rally

    * Crown jumps, CPI rise underpins cbank rate hike
    * Hungarian bond auction draws robust demand, yields drop
    * Hungarian cbank is seen announcing new easing on Nov. 21
    * Serbian central bank keeps rates on hold, dinar firms
    * Leu retests 5-year lows on new central bank comments

 (Adds Serbian central bank decision, Romanian central bank
comments, Hungarian bonds rally)
    By Sandor Peto
    BUDAPEST, Nov 9 (Reuters) - The crown surged to 4-year highs
against the euro on Thursday after Czech figures showed annual
inflation accelerating further beyond the central bank's (CNB) 2
percent target.
    Hungary's forint touched a one-month low as
October inflation was lower than expected, underpinning the
Hungarian central bank's (NBH) policy of monetary easing.
    Czech inflation accelerated to 2.9 percent from 2.7 percent
in September, and above an analysts' forecast of 2.8 percent.
Hungary's inflation retreated to 2.2 percent from 2.5 percent,
below analysts' 2.3 percent projection.
    The crown touched a 4-year high at 25.505 against
the euro and retreated to 25.52 by 1206 GMT, still firmer by a
third of a percent from Wednesday.
    The forint touched a one-month low at 312.44 after the
inflation data, but rebounded after an auction of government
bonds attracted robust demand, steadying at 311.99.
    The average yields were below secondary market levels and
10-year bonds were sold for the first time below U.S. Treasuries
yields, at an average of 2.23 percent.
    Hungarian yields rebounded slightly after the auction, but
sentiment remains good and the curve is below U.S. levels except
for 15-year bonds, traders said.
    They said dovish comments by Hungary's central bank on
Wednesday had reinforced expectations that it would announce new
measures at its Nov. 21 meeting to push long-term interest rates
    "They could say concretely what they will do to flatten the
curve and achieve a shift to fixed mortgage lending interest
rates," one Budapest-based trader said.
    The Czech central bank has increased interest rates twice
since August. Expectations for more hikes to come are seen
helping the crown lead a firming of currencies in the European
Union's eastern wing in the next year, according to a Reuters
poll of analysts.
    "With this (inflation) number, the pressure for breaking
through the 25.500 level will grow," one Prague-based dealer
said. "
    "We will see if it gets there but if it does, we could move
to a range of some 25.20-25.50 for the next couple of months,"
the dealer said, adding that another rate hike may come in
    Serbia's central bank kept the region's highest benchmark
central bank rate of 3.5 percent on hold on Thursday, after two
surprise cuts in as many months.
    The dinar firmed 0.1 percent to 118.7 versus the euro.
    The Romanian leu retested Tuesday's five-year lows
of 4.64 against the euro.
    On Tuesday, Romanian central bank Governor Mugur Isarescu's
comments after a rate-setting meeting were interpreted as
favouring a looser grip on the exchange rate. 
    On Thursday Isarescu said too much tightening would not be
conducive for an optimum policy mix. He also said
the leu had underperformed regional peers largely because of
Romania's large and rising trade deficit.
    Asked whether leu levels of more than 4.6 seen over the last
few days were close to the currency's balance level, Isarescu
said: "Relatively close."    
               CEE MARKETS  SNAPSH   AT  1306 CET         
                            Latest  Previo  Daily   Change
                            bid     close   change  in
 Czech crown                25.520  25.598   +0.31   5.83%
                                 0       0       %  
 Hungary                    311.99  311.96  -0.01%  -1.02%
 forint                         00      00          
 Polish zloty               4.2291  4.2353   +0.15   4.13%
 Romanian leu               4.6374  4.6285  -0.19%  -2.21%
 Croatian                   7.5375  7.5403   +0.04   0.23%
 kuna                                            %  
 Serbian                    118.70  118.85   +0.13   3.92%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            Latest  Previo  Daily   Change
                                    close   change  in
 Prague                     1058.7  1054.0   +0.44   +14.8
                                 0       7       %      8%
 Budapest                   40155.  40122.   +0.08   +25.4
                                48      07       %      7%
 Warsaw                     2496.0  2513.3  -0.69%   +28.1
                                 7       4              4%
 Bucharest                  7764.7  7777.2  -0.16%   +9.59
                                 2       7               %
 Ljubljana                  789.71  792.07  -0.30%   +10.0
 Zagreb                     1834.7  1839.3  -0.25%  -8.02%
                                 9       9          
 Belgrade                   729.14  730.57  -0.20%   +1.64
 Sofia                      670.74  672.49  -0.26%   +14.3
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
   2-year                    0.433   0.121   +118b   +11bp
                                                ps       s
   5-year                    0.685  -0.033   +104b   -6bps
   10-year                   1.658   0.067   +129b   +3bps
   2-year                    1.609  -0.001   +236b   -1bps
   5-year                    2.634  -0.003   +299b   -3bps
   10-year                   3.408   0.042   +304b   +0bps
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
 Czech Rep             <PR     0.9       1    1.25       0
 Hungary               <BU    0.08    0.09    0.14    0.03
 Poland                <WI   1.775   1.805    1.91    1.73
 Note: FRA     are for ask                                
 quotes        prices                               
 (Additional reporting by Jan Lopatka in Prague; Editing by
Gareth Jones)
0 : 0
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