October 9, 2018 / 10:11 AM / 7 months ago

CEE MARKETS-Hungarian bond yields surge on CPI, US Treasury yield rise

    * Hungarian yield at 3-yr high after CPI highest since 2013
    * Czech CPI retreats, but cbank is seen increasing rates

    By Sandor Peto
    BUDAPEST, Oct 9 (Reuters) - Hungary's 10-year government
bond yield jumped to a 3-year high on Tuesday as U.S. and Bund
yields rose and Hungary's annual inflation rate increased to its
highest level since early 2013.
    Debt yields rose across Europe including the European
Union's eastern members after the 10-year U.S. Treasury yield
 set seven-year highs above 3.25 percent.
    Hungary's corresponding yield traded at 3.86 percent, up 14
basis points from Monday's fixing and the highest since 2015.
    "The causes were a rise in core market yields and the
higher-than-expected inflation figure," one Budapest-based fixed
income trader said.
    Hungary's annual inflation increased to 3.6 percent in
September, a tad above expectations and a 5-and-1/2-year high.
    The forint eased slightly against the euro after
the figures and other data showing a smaller-than-expected trade
surplus in August.
    The government sold 3-month Treasury bills at a negative
yield after the figures, at -0.03 percent, slightly up from
-0.05 percent in a sale a week ago. 
    Analysts said inflation could stay above 3 percent, the
mid-point of the Hungarian central bank's (NBH) 2-4 percent
target range in the coming months, even though a higher 2017
base in crude prices may ease upwards pressure in the rest of
the year.
    The inflation rise is unlikely to trigger a change in the
NBH's monetary policy as core inflation remains moderate, even
though it picked up to 2.4 percent from 2.2 percent in August,
analysts said.
    Hungary's trade surplus could drop by 850 million euros this
year to 7.2 billion euros, but could still support the forint in
the rest of 2018, Takarekbank analyst Andras Horvath said in a
    Polish and Czech government bond yields rose by 2-3 basis
points, even though the Czech finance ministry said it would
limit bond auctions in the rest of the year.
    The zloty and the Czech crown shed 0.1
percent against the euro as a weakening of the yuan weighed on
risk appetite in global markets. 
    Warsaw's bluechip stock index still rose 0.5
percent, rebounding from a 3-week low.
    The crown's loss remained moderate even though September
Czech figures released on Tuesday showed the biggest monthly
fall in consumer prices since November, 2015.
    The 2.3 percent annual figure, after August's 2.5 percent,
is closer to the Czech central bank's 2 percent target, but is
unlikely to prevent further hikes in the bank's interest rates, 
analysts said.
    The bank's Vice-Governor Mojmir Hampl said it may increase
interest rates again at its November meeting, underpinning
market expectations.
    Romania's 10-year government bond yield, bid at 5.13
percent, was the highest since early August. Romania is due to
release inflation figures on Wednesday.        
            CEE       SNAPSHOT   AT                         
            MARKETS             1127 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7980   25.7810    -0.07%    -0.99%
 crown      >                                       
 Hungary    <EURHUF=  325.5000  325.4000    -0.03%    -4.48%
 forint     >                                       
 Polish     <EURPLN=    4.3185    4.3158    -0.06%    -3.29%
 zloty      >                                       
 Romanian   <EURRON=    4.6680    4.6699    +0.04%    +0.25%
 leu        >                                       
 Croatian   <EURHRK=  #N/A        7.3934  #VALUE!   #VALUE!
 kuna       >         Access                        
                      User req                      
 Serbian    <EURRSD=  #N/A      118.6400  #VALUE!   #VALUE!
 dinar      >         Access                        
                      User req                      
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1094.72  1095.400    -0.06%    +1.54%
 Budapest             36824.06  36768.02    +0.15%    -6.48%
 Warsaw                2235.94   2224.13    +0.53%    -9.15%
 Bucharest             8540.49   8521.11    +0.23%   +10.15%
 Ljubljana  <.SBITOP    836.29    838.68    -0.28%    +3.71%
 Zagreb                1768.36   1766.69    +0.09%    -4.04%
 Belgrade   <.BELEX1    729.04    727.94    +0.15%    -4.05%
 Sofia                  617.24    618.55    -0.21%    -8.89%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.6670    0.1310   +223bps    +13bps
   5-year   <CZ5YT=R    1.8770    0.0270   +196bps     +1bps
   10-year  <CZ10YT=    2.1590    0.0040   +160bps     -1bps
   2-year   <PL2YT=R    1.6100    0.0040   +217bps     +0bps
   5-year   <PL5YT=R    2.6270    0.0240   +271bps     +1bps
   10-year  <PL10YT=    3.3470    0.0340   +279bps     +2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.02      2.20      2.33      1.74
 Hungary                  0.48      0.81      1.14      0.17
 Poland                   1.77      1.81      1.86      1.72
 Note: FRA  are for ask prices                              
 (Reporting by Sandor Peto, editing by Ed Osmond)
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