August 30, 2018 / 1:29 PM / 3 months ago

CEE MARKETS-Forint hits five-week low, Hungarian bonds ease on Turkey

    * Lira's fall still weighing on CEE currencies
    * Forint at five-week low, Hungarian bonds sold at higher
yields
    * Hungarian bond yields rise after well-bid auction

 (Adds Hungarian bond auction results, trader comment, incoming
Slovenian government)
    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, Aug 30 (Reuters) - The forint weakened to a
five-week low against the euro on Thursday as the Turkish lira's
 slide continued to pose a threat to Central Europe's
currency markets.
    Hungary sold 87 billion forints worth of government bonds at
an auction, where three- and five-year debt drew strong demand,
almost 50 percent more than originally planned.
    The bonds were sold at yields 10 to 15 basis points lower
than in a sale two weeks ago, but yields rose after the auction.
    Ten 10-year bondsr, which drew lower demand after having
been bought in the secondary market for days, saw the biggest
rise. They traded at 3.46 percent at 1235 GMT, up 10 basis
points.
    "The Turkish weakening could be behind the (post-auction)
selling," one Budapest-based fixed income trader said.
    The region's economies do not have strong trade and
financial links with Turkey and have much better current
accounts, but risk aversion on other emerging markets often
reaches them. 
    The leu eased 0.2 percent to 4.6435 against the
euro by 1248 GMT, retreating from Wednesday's three-week highs. 
    The forint shed 0.14 percent. The zloty
and the Czech crown eased by less than 0.1 percent.   
 
    Czech government bond yields edged up by 2 to 4 basis
points, with the 10-year bond trading at 3.14 percent.   
    The Czech central bank is expected to keep raising interest
rates to fight a rise in inflation above its 2 percent target.
But the higher rates have not helped the crown.
    The Czech currency's weakness during the Turkish lira's
sell-off and still-strong Czech wage growth, make many analysts
believe the central bank could raise rates for a third time in a
row at its September meeting.
    Komercni Banka on Thursday changed its next rate hike call
to next month from November.
    "Given strong core inflation, a weak koruna and the prospect
of sound wage growth, we change our CNB call and add a September
hike to our outlook," it said in an analysis. 
    "We still believe that there will be one more hike in
November and three hikes in next year," the note said.
    The region's main equity indices mostly dropped, led by
Warsaw's 0.8 percent decline, as worries over the
U.S.-China trade war weighed on sentiment in global stock
markets.
    Ljubljana bucked the decline, gaining 0.3 percent.
    Slovenia's incoming government coalition said on Wednesday
that it planned to run a balanced budget.
    "The (coalition) agreement boosts prospects for more
privatisations which should help the government to get rid of
the state assets and boost fiscal performance which should be
credit positive for its sovereign rating," Raiffeisen analyst 
Gintaras Shlizhyus said in a note.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1457 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7660   25.7550    -0.04%    -0.87%
 crown      >                                       
 Hungary    <EURHUF=  326.5000  325.8000    -0.21%    -4.77%
 forint     >                                       
 Polish     <EURPLN=    4.2920    4.2880    -0.09%    -2.69%
 zloty      >                                       
 Romanian   <EURRON=    4.6445    4.6350    -0.20%    +0.76%
 leu        >                                       
 Croatian   <EURHRK=    7.4390    7.4355    -0.05%    -0.12%
 kuna       >                                       
 Serbian    <EURRSD=  118.1400  118.3300    +0.16%    +0.30%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1077.67  1078.850    -0.11%    -0.05%
                                       0            
 Budapest             37159.50  37234.86    -0.20%    -5.63%
 Warsaw                2362.01   2380.68    -0.78%    -4.03%
 Bucharest             8333.95   8332.93    +0.01%    +7.48%
 Ljubljana  <.SBITOP    867.76    865.06    +0.31%    +7.61%
            >                                       
 Zagreb                1821.09   1824.65    -0.20%    -1.18%
 Belgrade   <.BELEX1    731.97    735.68    -0.50%    -3.66%
            5>                                      
 Sofia                  630.99    630.41    +0.09%    -6.86%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.3320    0.0390   +194bps     +6bps
            R>                                      
   5-year   <CZ5YT=R    1.7010    0.0170   +196bps     +6bps
            R>                                      
   10-year  <CZ10YT=    2.1370    0.0210   +177bps     +6bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5930    0.0060   +220bps     +3bps
            R>                                      
   5-year   <PL5YT=R    2.4860   -0.0230   +275bps     +2bps
            R>                                      
   10-year  <PL10YT=    3.1570   -0.0060   +279bps     +3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.84      1.96      2.05      1.49
            <PRIBOR=                                
            >                                       
 Hungary                  0.47      0.65      0.87      0.17
                                                    
 Poland                   1.75      1.80      1.83      1.71
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto, editing by Larry King)
  
 
 
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