September 17, 2018 / 10:48 AM / in a month

CEE MARKETS-Hungarian bond yields rise on bets for central bank policy tweak

    By Sandor Peto
    BUDAPEST, Sept 17 (Reuters) - Hungary's 10-year government
bond yield rose to its highest level since early July on Monday
amid expectations that the central bank may tweak a swap tool
that encourages banks to buy long-term bonds.
    The crown, meanwhile, was the strongest against
the euro since late April due to bets that the Czech central
bank (CNB) will continue to increase its interest rates next
week.
    A pick-up in inflation in fast-growing Central European
economies strengthened hawkish voices in the CNB.
    In Budapest, the National Bank of Hungary (NBH) is expected
to keep its interest rates at record lows at its meeting on
Tuesday, but analysts said it could make hints and pace how it
wants to withdraw liquidity from domestic markets.
    Analysts and market participants said the bank was unlikely
to touch short-term interest rates including its foreign
exchange swap tool which influences them.
    But it may announce cuts in liquidity provided to banks
through its monetary policy interest rate swap (MIRS) tool,
which some traders said could drive long-term yields higher.
    "Central banks in the world generally tighten (short-term)
policy (rates), and the concern is that the Hungarian central
bank will not do that," one Budapest-based fixed income trader
said.
    "If short-term rates are not allowed to rise, tension
appears at the long end of the curve," the trader added.
    Ten-year Hungarian bonds traded at a yield of 3.64 percent,
their highest level since July 4, and only 12 basis points below
3-year highs set on July 3, after the forint hit record lows
against the euro beyond 330.
    The forint traded flat at 324.91 at 0932 GMT, and some
analysts said the NBH would probably not want to strengthen it
further by signalling a tightening in its short-term interest
rates or fx swap tool.
    Inflation ran at 3.4 percent in August, above the mid-point
of the bank's 2-4 percent target range, but the NBH is unlikely
to get worried unless the forint weakens significantly, boosting
import prices, analysts have said.
    The CNB is more worried over inflation, which, running at
2.5 percent in August, stays above its 2 percent goal.
    A faster-than-expected 3.3 percent rise in the August Czech
producer price index reported on Monday added to the signs of
inflation pressures.
    The Czech crown has hit several 4-month highs against the
euro in the past days, after CNB Governor Jiri Rusnok told
Reuters last week that the next rate hike was close.

    On Monday it set its firmest levels since April 26. At 0932
GMT it traded at 25.458, firmer by 0.1 percent.
    
       CEE   SNAP   AT  1235             
       MARK  SHOT  CET               
       ETS                           
             CURRENCIES                  
             Late  Prev  Dail  Chan      
             st    ious  y     ge    
             bid   clos  chan  in        
                   e     ge    2018  
 Czec  <EUR  25.4  25.4  0.03  0.28      
 h     CZK=     7    78     %     %  
 crow  >                             
 n                                   
 Hung  <EUR  324.  324.  0.02  -4.3      
 ary   HUF=     9    95     %    0%  
 fori  >                             
 nt                                  
 Poli  <EUR  4.30  4.30  0.13  -2.9      
 sh    PLN=    13    71     %    0%  
 zlot  >                             
 y                                   
 Roma  <EUR  4.64  4.64  -0.0  0.79      
 nian  RON=     3     1    4%     %  
 leu   >                             
 Croa  <EUR  7.42  7.43  0.02  0.02      
 tian  HRK=     9    05     %     %  
 kuna  >                             
 Serb  <EUR  118.  118.  0.08  0.25      
 ian   RSD=    21     3     %     %  
 dina  >                             
 r                                   
 Note  calculated  1800                  
 :     from        CET               
 dail                                
 y                                   
 chan                                
 ge                                  
                                         
             Late  Prev  Dail  Chan      
             st    ious  y     ge    
                   clos  chan  in        
                   e     ge    2018  
 Prag  <.PX  1094  1095  -0.0  1.55      
 ue    >      .89   .46    5%     %  
 Buda  <.BU  3597  3626  -0.8  -8.6      
 pest  X>     5.8  9.17    1%    4%  
 Wars  <.WI  2217  2232  -0.6  -9.8      
 aw    G20>   .91   .07    3%    9%  
 Buch  <.BE  8164  8162  0.02  5.29      
 ares  TI>    .01   .69     %     %  
 t                                   
 Ljub  <.SB  851.  851.  -0.0  5.58      
 ljan  ITOP     4    92    6%     %  
 a     >                             
 Zagr  <.CR  1793  1793  -0.0  -2.6      
 eb    BEX>    .5   .99    3%    8%  
 Belg  <.BE  723.  723.  -0.0  -4.8      
 rade  LEX1    36    55    3%    0%  
       5>                            
 Sofi  <.SO  627.  629.  -0.2  -7.3      
 a     FIX>    64    37    7%    5%  
             BOND                        
             S                       
             Yiel  Yiel  Spre  Dail      
             d     d     ad    y     
             (bid  chan  vs    chan      
             )     ge    Bund  ge    
                               in    
 Czech                         spre      
 Republic                      ad    
       <CZ2  1.53  0.11   +20   +10      
 2-ye  YT=R     9     2  8bps  bps   
 ar    R>                            
       <CZ5  1.79  -0.0   +19  -4bp      
 5-ye  YT=R     5    16  5bps  s     
 ar    R>                            
       <CZ1  2.17  0.03   +17   +2b      
 10-y  0YT=           5  1bps  ps    
 ear   RR>                           
 Pola                                    
 nd                                  
       <PL2  1.62  -0.0   +21  -2bp      
 2-ye  YT=R     9    03  7bps  s     
 ar    R>                            
       <PL5  2.57  0.02   +27   +1b      
 5-ye  YT=R     3     8  3bps  ps    
 ar    R>                            
       <PL1  3.23  0.01   +27   +0b      
 10-y  0YT=     7     4  7bps  ps    
 ear   RR>                           
       FORW  RATE  AGREEMENT             
       ARD                           
             3x6   6x9   9x12  3M
                               interbank
 Czec  <CZK  1.92  2.11  2.22  1.54      
 h     FRA>                          
 Rep   <PRI                          
       BOR=                          
       >                             
 Hung  <HUF  0.56  0.77     1  0.21      
 ary   FRA>                          
       <BUB                          
       OR=>                          
 Pola  <PLN  1.77   1.8  1.84  1.71      
 nd    FRA>                          
       <WIB                          
       OR=>                          
 Note  are for                           
 :     ask prices                    
 FRA                                 
 quot                                
 es                                  
 
 (Reporting by Sandor Peto; Editing by Toby Chopra)
  
 
 
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