April 24, 2018 / 9:34 AM / in 6 months

CEE MARKETS-Forint sets 4-week low ahead of central bank meeting

    * Hungary central bank seen holding fire, reaffirming loose
policy
    * Forint eases slightly further after Monday's USD-driven
fall
    * Crown rebounds, central banker says its firming has been
slow
    * Romanian president offers mediation in row over inflation
jump

    By Sandor Peto
    BUDAPEST, April 24 (Reuters) - The forint touched a
four-week low against the euro, under-performing Central
European peers, as the Hungarian central bank was expected to
reaffirm its loose policy on Tuesday.
    The bank, led by a key ally of Prime Minister Viktor Orban,
holds its first meeting since the ruling party secured a tight
two-thirds parliament majority at elections on April 8.
    The bank is expected to keep its interest rates at record
lows, and analysts in a Reuters poll projected no change in its
base rate at least until 2020.
    Deputy Governor Marton Nagy last week projected double-digit
annual corporate and household lending growth for the next
years.
    "It is hard to read any policy change from those comments
... these are very far from concrete things," one Budapest-based
fixed income trader said.
    Inflation has been mild in most of the region this year.
    An earlier rise in the Czech Republic and a surge in Romania
since late last year prompted central bank rate hikes, while
Hungarian and Polish rate setters have not showed worries over
inflation.
    The forint and the zloty, the region's
most liquid units, fell sharply against the euro on Monday,
drifting off recent two-month highs, as investors in the world
bought dollar assets after a rise in U.S. Treasuries yields. 
    The forint lost more ground on Tuesday, trading at 312.70 at
0832 GMT.
    Government bond yields, which hit multi-week highs in the
region on Monday, continued to track core market peers and 
retreated.
    Poland's 10-year yield dropped 4 basis points to 3.0475
percent and the corresponding Hungarian yield fell 5 basis
points from Monday's fixing to 2.5 percent.
    Czech yields moved little, and the Czech crown
regained some of the ground lost on Monday, after Czech National
Bank board member Marek Mora was quoted as saying that the crown
had strengthened more slowly than expected.
    The bank has forecast the average crown rate to firm to 24.9
versus the euro in the second quarter. It traded at 25.42 on
Tuesday.
    The leu was steady at 4.655 against the euro after
Romanian President Klaus Iohannis offered to mediate between the
ruling party and the central bank in a row over inflation, which
jumped to 5 percent in annual terms in March, the highest since
2013.
    Late last week, the leader of the Social Democrats lashed
out against criticism that a surge in inflation was driven by
his party's fiscal and income policies, accusing the central
bank of exaggerating the impact of higher trade deficits.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1032 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4200   25.4330    +0.05%    +0.48%
 crown      >                                       
 Hungary    <EURHUF=  312.7000  312.5000    -0.06%    -0.57%
 forint     >                                       
 Polish     <EURPLN=    4.1990    4.2006    +0.04%    -0.54%
 zloty      >                                       
 Romanian   <EURRON=    4.6550    4.6540    -0.02%    +0.53%
 leu        >                                       
 Croatian   <EURHRK=    7.4170    7.4120    -0.07%    +0.18%
 kuna       >                                       
 Serbian    <EURRSD=  118.0500  118.1200    +0.06%    +0.38%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1127.01  1121.470    +0.49%    +4.53%
                                       0            
 Budapest             38378.80  38123.45    +0.67%    -2.54%
 Warsaw                2310.14   2291.59    +0.81%    -6.14%
 Bucharest             8969.00   8957.03    +0.13%   +15.67%
 Ljubljana  <.SBITOP    836.51    838.29    -0.21%    +3.74%
            >                                       
 Zagreb                1782.39   1781.25    +0.06%    -3.28%
 Belgrade   <.BELEX1    739.43    739.95    -0.07%    -2.68%
            5>                                      
 Sofia                  657.95    659.10    -0.17%    -2.88%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.7500   -0.0800   +130bps     -7bps
            R>                                      
   5-year   <CZ5YT=R    1.1980   -0.0090   +121bps     +0bps
            R>                                      
   10-year  <CZ10YT=    1.7370   -0.0200   +112bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5210   -0.0090   +207bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.3580   -0.0410   +237bps     -3bps
            R>                                      
   10-year  <PL10YT=    3.0440   -0.0450   +243bps     -3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.95      1.05      1.20      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.10      0.18      0.03
                                                    
 Poland                   1.73      1.75      1.76      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Additional reporting by Luiza Ilie in Bucharest and Jason
Hovet in Prague, editing by Ed Osmond)
  
 
 
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