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CEE MARKETS-Hungarian bonds rally to records on central bank pledges
September 22, 2017 / 10:23 AM / a month ago

CEE MARKETS-Hungarian bonds rally to records on central bank pledges

    * Hungarian 10-year yield spread over Bunds at record low
    * Assets rangebound, investors await guidance from ECB
    * German election watched, unlikely to unsettle markets

 (Adds zloty and crown gains, Polish data, new comment)
    By Sandor Peto
    BUDAPEST, Sept 22 (Reuters) - Hungarian government bonds
extended their rally on Friday due to expectations the central
bank will continue to support the market despite a gradual
worldwide monetary tightening.
    The yield on 10-year bonds was fixed down 13 basis points at
2.52 percent, the lowest ever. Its 208-basis-point
spread over corresponding Bunds was also a record low.
    The Hungarian Central Bank (NBH) cut its overnight deposit
rate deeper into the red on Tuesday and pledged to use further
tools to push market interest rates lower along the curve.
    Investors expect it to maintain loose conditions for years,
even if global interest rates continue to rise, traders said. 
    "Negative short-term yields mean a capital loss and that
nudges investments into longer maturities," one Budapest-based
trader said. 
    "Hungary's central bank is going against the grain ... (but)
the feeling is that the set-up they have could work and stay
stable in the next years."
    The forint traded flat at 309.80 at 1239 GMT.
    The NBH's dovish signals and measures have knocked it down
from 28-month highs set a month ago beyond 302. The bank could
keep it around 310, market participants said.
    The Czech central bank chose a different route last month
when it lifted interest rates, the first such move in the
European Union since 2012.
    It is seen lifting rates further. Some investors expect the
next hike to come at the bank's next meeting, on Sept. 27.
    The Czech crown set a 3-week high at 26.03 against
the euro, before retreating to 26.05.
    The zloty firmed 0.1 percent to 4.2704. 
    Data released on Friday showed a fall in Poland's
unemployment rate to 25-year lows at 7 percent, another sign of
robust growth in Central European economies.
    Poland's annual growth will probably exceed 4 percent, KBC
analysts said in a note.
    "A risk of delivering hawkish comments based on overheating
fears of some MPC members (rate-setters) has definitely
increased," they said.
    Central European assets mostly moved little as investors
awaited signs from the European Central Bank on whether it will
follow the slow tightening signalled by the Federal Reserve on
Wednesday.
    Elections in Germany, the region's biggest export market,
over the weekend are also being watched.
    With Angela Merkel's conservatives maintaining a strong
lead, the outcome is unlikely to unsettle Central European
markets.
    "The key thing that investors in the region are waiting for
is the guidance the ECB will give in October," said Eszter
Gargyan, analyst at Citigroup in Budapest.
    
               CEE MARKETS  SNAPSH   AT  1439 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                26.050  26.066   +0.06   3.67%
                                 0       5       %  
 Hungary                    309.80  309.79   +0.00  -0.32%
 forint                         00      00       %  
 Polish zloty               4.2704  4.2756   +0.12   3.13%
                                                 %  
 Romanian leu               4.5970  4.5990   +0.04  -1.35%
                                                 %  
 Croatian                   7.4840  7.4815  -0.03%   0.95%
 kuna                                               
 Serbian                    119.10  119.21   +0.09   3.57%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1046.5  1047.8  -0.12%   +13.5
                                 2       0              5%
 Budapest                   38082.  38109.  -0.07%   +19.0
                                42      21              0%
 Warsaw                     2464.5  2468.7  -0.17%   +26.5
                                 0       2              2%
 Bucharest                  7862.9  7886.1  -0.29%   +10.9
                                 5       3              8%
 Ljubljana                  799.42  801.25  -0.23%   +11.4
                                                        0%
 Zagreb                     1826.1  1827.5  -0.07%  -8.45%
                                 8       4          
 Belgrade                   725.19  732.52  -1.00%   +1.09
                                                         %
 Sofia                      678.65  677.65   +0.15   +15.7
                                                 %      3%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                   -0.215   0.011   +046b   +0bps
                                                ps  
   5-year                    0.109  -0.091   +036b  -10bps
                                                ps  
   10-year                   1.132   -0.05   +067b   -6bps
                                                ps  
 Poland                                                   
   2-year                    1.796  -0.012   +247b   -2bps
                                                ps  
   5-year                    2.723  -0.003   +297b   -1bps
                                                ps  
   10-year                   3.372  -0.002   +291b   -1bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.69    0.85    0.94       0
               IBOR=>                               
 Hungary               <BU    0.07    0.09   0.125    0.05
               BOR=>                                
 Poland                <WI    1.79    1.84    1.89    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
      

 (Additional reporting by Jason Hovet in Prague; Editing by
Andrew Heavens)
  
 
 

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