January 11, 2018 / 10:23 AM / a year ago

CEE MARKETS-Fx, bonds firm, Romanian auction seen drawing good demand

    * Bond yields drop as China dismisses report on U.S. debt
    * Serbian central bank seen keeping rates on hold

    By Sandor Peto
    BUDAPEST, Jan 11 (Reuters) - Central European currencies and
government bonds mostly firmed on Thursday as appetite increased
after Chinese regulators dismissed a media report the government
is halting or reducing its purchases of U.S. debt.
    The region's government bond yields mostly dropped by a few
basis points, after mostly rising on Wednesday tracking a rise
in the 10-year U.S. Treasuries yield to a 10-month high.
    The dinar led a rise of regional currencies,
firming 0.13 percent to 118.64 against the euro by 0935 GMT
ahead of a meeting of the Serbian central bank.
    The bank, which sold euros in the market on Wednesday to
support the dinar, is expected to keep its 3.5 percent benchmark
rate on hold. 
    With inflation running below its 3 percent target, the bank
does not need higher rates, while it is also unlikely to cut the
region's highest benchmark rate as U.S. interest rates are
expected to rise this year, analysts have said.
    The Polish and the Hungarian central banks are not worried
over inflation either. The Polish bank retained its loose policy
stance on Wednesday.
    Hungary's forint  firmed 0.12 percent to 309.05
against the euro.
    "The Chinese scare is over, and the Hungarian central bank
(NBH) has not said anything rough either (to weaken the forint),
so the markets (in the region) are back to normal," one
Budapest-based fixed income trader said.
    NBH governor Gyorgy Matolcsy told weekly Figyelo that the
bank's benchmark base rate must stay at a record low of 0.9
percent and interbank rates around zero for inflation to reach
the 3 percent target by mid-2019 in a sustainable way.

    With economic growth roaring ahead in the region, partly
driven by surging wages, the Czech central bank started to raise
its interest rates last year and Romania's bank on Monday.

    Romania's 10-year bond yield dropped a tad to 4.18 percent
on Thursday, joining the regional trend, and an auction of
four-year papers is expected to draw healthy demand.
    "(The auction) should see good demand given the money market
liquidity backdrop and print a cut-off yield near yesterday
closing mid of 3.82 percent," ING analyst Ciprian Dascalu said
in a note.
    Most Czech government bond yields also dropped, except for
2-year papers which were bid at 0.62 percent, up 9 basis points.
    Czech lawmakers postponed a confidence vote on Prime
Minister Andrej Babis's minority government on Wednesday.
    Political developments rarely influence Czech markets.
    The crown traded 0.08 percent firmer, at 25.534
versus the euro.
           CEE      SNAPSHO   AT                      
           MARKETS  T        1035              
                    Latest   Previou  Daily    Change
                    bid      close    change   in 2018
 Czech     <EURCZK  25.5340  25.5550   +0.08%   +0.03%
 crown     =>                                  
 Hungary   <EURHUF  309.050  309.420   +0.12%   +0.60%
 forint    =>             0        0           
 Polish    <EURPLN   4.1745   4.1760   +0.04%   +0.04%
 zloty     =>                                  
 Romanian  <EURRON   4.6369   4.6410   +0.09%   +0.92%
 leu       =>                                  
 Croatian  <EURHRK   7.4480   7.4485   +0.01%   -0.24%
 kuna      =>                                  
 Serbian   <EURRSD  118.640  118.800   +0.13%   -0.12%
 dinar     =>             0        0           
 Note:     calculated from            1800            
 daily                                CET      
                    Latest   Previou  Daily    Change
                             close    change   in 2018
 Prague             1102.06  1101.73   +0.03%   +2.22%
 Budapest           39595.3  39651.2   -0.14%   +0.55%
                          7        3           
 Warsaw    <.WIG20  2507.38  2511.27   -0.15%   +1.88%
 Buchares           8088.68  8034.85   +0.67%   +4.32%
 Ljubljan  <.SBITO   816.44   818.42   -0.24%   +1.25%
 a         P>                                  
 Zagreb    <.CRBEX  1857.16  1857.69   -0.03%   +0.78%
 Belgrade  <.BELEX   768.29   767.53   +0.10%   +1.12%
 Sofia     <.SOFIX   705.70   697.93   +1.11%   +4.17%
                    Yield    Yield    Spread   Daily
                    (bid)    change   vs Bund  change
 Czech                                         spread
   2-year  <CZ2YT=   0.6200   0.0900   +124bp    +9bps
           RR>                              s  
   5-year  <CZ5YT=   0.9270  -0.0060   +114bp    +1bps
           RR>                              s  
           <CZ10YT   1.6750  -0.0340   +122bp    -1bps
 10-year   =RR>                             s  
   2-year  <PL2YT=   1.6110  -0.0150   +223bp    -1bps
           RR>                              s  
   5-year  <PL5YT=   2.5470  -0.0400   +276bp    -2bps
           RR>                              s  
           <PL10YT   3.2900  -0.0430   +284bp    -2bps
 10-year   =RR>                             s  
           FORWARD  RATE     AGREEME                  
                    3x6      6x9      9x12     3M
 Czech     <CZKFRA     1.03     1.20     1.33  
 Rep       ><PRIBO                             
 Hungary   <HUFFRA     0.09     0.06     0.10     0.03
 Poland    <PLNFRA     1.75     1.78     1.88     1.72
 Note:     are for ask                                
 FRA       prices                              
 (Additional reporting by Luiza Ilie in Bucharest; editing by
Ralph Boulton)
0 : 0
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