November 12, 2018 / 4:08 PM / 6 months ago

CEE MARKETS-Forint falls and Romanian CPI decline disappoints

    * Dollar buying on Brexit worries weighs on forint
    * Hungarian government bond yields tick higher
    * Romanian bond yields mixed after repo tender, CPI data

 (Releads with forint easing, analyst comments, Romanian central
bank tender)
    By Sandor Peto
    BUDAPEST, Nov 12 (Reuters) - The forint eased
slightly on Monday as dollar buying amid worries over Britain's
talks to quit the European Union weighed on Central European
    The forint traded at 321.75 against the euro at 1450 GMT,
down 0.1 percent. Against the dollar it touched an 11-day
low at 286.31.
    Investors bought the greenback versus European currencies
including the euro amid doubts that Britain will be able
to secure a deal on quitting the EU next year.
    Hungarian government bond yields extended last week's slow
rise, which followed weeks of falls.
    The 10-year yield, trading around 3.67 percent,
has risen 13 basis points in the past three sessions, but was
still 25 basis points below a peak one month ago.
    The latest government debt agency figures dated Nov. 8
 showed that the forint-denominated holding of
foreigners reached a 3-year high over 4 trillion forints, after
a steady rise since August.
    Citigroup, in a note, introduced buying the dollar against
the forint at 285.87, with a 295.7 target, as "a trade idea of
the week".
    It said Hungarian government bonds had attracted renewed
interest due to "the false perception of a favourable EUR price
action over the past weeks", and rising concerns that Central
Europe's economic growth is slowing.
    "We believe the biased inflow wave into HUF is not
sustainable and the EURUSD weakness may be the trigger for a new
USDHUF upside move," Citi said.
    One or two big London names have bought the bonds as
financing that is cheap, with the central bank (NBH) holding
short-term interest rates at record lows, while keeping markets
awash in money through its fx swaps, market participants said.
    It has been a key issue that delayed financing from the
European Union for projects pre-financed by the government has
started to flow in, generating hopes for further strong inflows
late this year, said Peter Virovacz, analyst of ING in Budapest.
    "It is even possible, that after its recent strong bond
sales, (the debt agency) AKK will shift to bond repurchases in
December," he said.
    Elsewhere in the region, the Romanian central bank (NBR)
continued to pump money into interbank markets via its repo
    Its allocations through the tenders and hopes for a fast
decline in inflation helped Romanian government bond yields fall
30-40 basis points in the past weeks.
    Yields in the secondary market were mixed, after Romania's
inflation fell to 4.3 percent in October from the region of 5
percent, but remained above expectations.
    "We do not rule out a hike in the (NBR's 2.5 percent) policy
rate at beginning of 2019," Erste analyst Eugen Sinca said in a
            CEE       SNAPSHOT   AT                         
            MARKETS             1550 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.9320   25.9400    +0.03%    -1.50%
 crown      >                                       
 Hungary    <EURHUF=  321.7500  321.4000    -0.11%    -3.37%
 forint     >                                       
 Polish     <EURPLN=    4.2935    4.2920    -0.03%    -2.73%
 zloty      >                                       
 Romanian   <EURRON=    4.6569    4.6584    +0.03%    +0.49%
 leu        >                                       
 Croatian   <EURHRK=    7.4260    7.4269    +0.01%    +0.06%
 kuna       >                                       
 Serbian    <EURRSD=  118.1700  118.3000    +0.11%    +0.28%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1082.97  1089.080    -0.56%    +0.45%
 Budapest             38438.65  38586.63    -0.38%    -2.38%
 Warsaw                2232.25   2232.25    +0.00%    -9.30%
 Bucharest             8645.29   8657.22    -0.14%   +11.50%
 Ljubljana  <.SBITOP    817.88    811.93    +0.73%    +1.43%
 Zagreb                1768.18   1786.19    -1.01%    -4.05%
 Belgrade   <.BELEX1    744.56    744.56    +0.00%    -2.01%
 Sofia                  595.26    597.76    -0.42%   -12.13%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.6100    0.1160   +226bps    +13bps
   5-year   <CZ5YT=R    1.8260    0.0030   +203bps     +3bps
   10-year  <CZ10YT=    2.1090    0.0000   +172bps     +2bps
   2-year   <PL2YT=R    1.5490   -0.0080   +220bps     +1bps
   5-year   <PL5YT=R    2.4510   -0.0070   +265bps     +2bps
   10-year  <PL10YT=    3.2350    0.0000   +285bps     +2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.05      2.20      2.35      1.99
 Hungary                  0.33      0.61      0.97      0.15
 Poland                   1.76      1.80      2.05      1.72
 Note: FRA  are for ask prices                              
 (Additional reporting by Luiza Ilie in Bucharest, Sujata
Rao-Coverley in London, editing by Larry King)
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