December 18, 2018 / 4:00 PM / 6 months ago

CEE MARKETS-Forint rebounds as central bank toughens monthly statement

    * Hungarian central bank shifts to more hawkish language
    * Forint reverses earlier weakening, 10-year yield retreats
    * Zloty eases, wage growth not seen making cbank more
    * Warsaw stocks rise, Bucharest shares retreat

 (Recasts with Hungarian central bank decision and statement)
    By Sandor Peto
    BUDAPEST, Dec 18 (Reuters) - The forint recouped ground lost
in the past days after Hungary's central bank (NBH) removed a
clause referring to maintaining loose monetary conditions from
its monthly statement on Monday.
    It kept its main rate at Central Europe's lowest level, a
record-low 0.9 percent.
    But its statement became more hawkish, clarifying that
domestic core inflation figures will guide its policy even if
the European Central Bank postpones the start of its own
interest rates expected for the autumn of 2019, analysts said.
    "They (the NBH) made it clear that they are guided by data.
They hold the start pistol, watch data, and they will shoot when
the time comes," said Peter Virovacz of ING in Budapest.
    The forint firmed more than 0.1 percent against
the euro to 322.8 by 1504 GMT, reversing an early weakening and
reaching a 5-day high.
    It has eased in the past few days amid doubts that the bank
would provide clues about future monetary tightening.
    "The fall in crude prices (in the fourth quarter) and the
worries over (global) economic growth managed to release the
bank from under pressure," one Budapest-based fixed income
trader said.
    The NBH, while shifting to more hawkish language, made no
change in its fx swap tool through which it manages liquidity in
markets and the short-term BUBOR interbank interest rates.
    "This means, the market has not been surprised too much and
the bank will not really do anything in the next quarter," the
trader said.
    "Tomorrow's Fed meeting will be more interesting, before the
market goes into Christmas mode," the trader added.
    Hungary's 10-year government bond yield retreated from early
highs, to trade around 3.23 percent.
    Poland's corresponding yield dropped 3 basis
points from Monday to 2.888 percent, off a 2-year low set at
2.867 percent earlier in the session.
    While the forint firmed, the zloty eased slightly
to 4.2842 against the euro.
    Polish data which showed continued fast growth in wages did
not change expectations that the Polish central bank will keep
monetary conditions loose next year. 
    Equity indices were mixed in Central Europe.
    Warsaw gained 1.25 percent, while Bucharest shares
 shed  1.2 percent, narrowing this years performance gap.
    Warsaw, by far the biggest stock exchange in the region, x
has eased more than 6 percent since the end of 2017, knocked
down by capital flows into the dollar from emerging markets.
Bucharest, an earlier regional underperfomer has gained 8.7
percent this year.
            CEE       SNAPSHOT   AT                         
            MARKETS             1604 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7580   25.7680    +0.04%    -0.84%
 crown      >                                       
 Hungary    <EURHUF=  322.8000  323.2500    +0.14%    -3.68%
 forint     >                                       
 Polish     <EURPLN=    4.2842    4.2820    -0.05%    -2.52%
 zloty      >                                       
 Romanian   <EURRON=    4.6465    4.6480    +0.03%    +0.71%
 leu        >                                       
 Croatian   <EURHRK=    7.4200    7.4035    -0.22%    +0.14%
 kuna       >                                       
 Serbian    <EURRSD=  118.4400  118.3800    -0.05%    +0.05%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1025.10  1027.870    -0.27%    -4.92%
 Budapest             39524.72  39675.76    -0.38%    +0.37%
 Warsaw                2310.47   2281.87    +1.25%    -6.12%
 Bucharest             8425.20   8524.69    -1.17%    +8.66%
 Ljubljana  <.SBITOP    796.79    793.86    +0.37%    -1.19%
 Zagreb                1747.42   1744.58    +0.16%    -5.18%
 Belgrade   <.BELEX1    753.68    746.93    +0.90%    -0.81%
 Sofia                  592.46    591.24    +0.21%   -12.55%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.6450    0.0310   +225bps     +3bps
   5-year   <CZ5YT=R    1.8240    0.0300   +209bps     +3bps
   10-year  <CZ10YT=    2.0340    0.0260   +178bps     +3bps
   2-year   <PL2YT=R    1.4070   -0.0070   +201bps     -1bps
   5-year   <PL5YT=R    2.3210   -0.0540   +259bps     -5bps
   10-year  <PL10YT=    2.9070   -0.0220   +265bps     -2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.18      2.27      2.34      2.02
 Hungary                  0.30      0.53      0.80      0.13
 Poland                   1.75      1.77      1.78      1.72
 Note: FRA  are for ask prices                              

 (Reporting by Sandor Peto, editing by Richard Balmforth)
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