April 11, 2019 / 2:54 PM / 15 days ago

CEE MARKETS-Hungarian, Romanian bond yields rise on inflation worry

    * Romanian 10-year yield spread over Bunds is widest since
2012
    * Inflation in CEE is highest in Budapest, Bucharest
    * ECB, Fed outlooks give temporary relief to Hungarian bonds

 (Recasts with Hungarian bond auction result, Romanian bond
yield rise)
    By Sandor Peto
    BUDAPEST, April 11 (Reuters) - Romania's 10-year government
bond yields reached their widest spread over Bunds since 2012 on
Thursday and Hungarian bond yields rose amid worries over a rise
in inflation in Central Europe.
    A surge in wages is driving consumption and economic growth
in the European Union's eastern wing. It has also contributed to
a renewed rise in inflation this year.
    March figures published in the past days showed that annual
inflation approached the top of central bank target ranges in
the Czech Republic and Hungary and exceeded it in Romania.
    Comments by he European Central Bank and the Federal Reserve
signaling no tightening in policy made the region's currencies
and bonds relatively more attractive, but also fueled worries
over economic growth.
    The comments gave some relief to the region's government
bonds on Wednesday, but Hungarian and Romanian yields resumed a
rise on Thursday.
    Hungary's bi-weekly government bond auctions
 drew healthy demand, but yields rose by 3 to 4
basis points, regaining the ground lost on Wednesday.
    "It is like Romania: they also had bad inflation figures and
investors have not digested them yet," one Budapest-based fixed
income dealer said. 
    The prospect of loose monetary policy in the euro zone and
the United States allows more accommodative conditions in the
region as well, but high inflation figures still fuel worries.
    Romania and Hungary have the highest inflation rates in the
region, at 4 and 3.7 percent, respectively, while Hungary has
the lowest central bank benchmark rate at 0.9 percent.
    Romania's government bond yields rose 6 to 8 basis points.
The 10-year yield, trading around 4.95 percent, was almost 5
percentage point above its German peer, its largest spread since
late 2012.    
    Romania's spiraling inflation and budget and current account
deficits draw concern, weighing on its bond prices, Raiffeisen
analyst Gintaras Shlizhyus said in a note.
    The leu eased slightly to 4.7575 against the euro
by 1413 GMT.
    The ROBOR overnight interbank interest rate,
which indicates how tight liquidity conditions are, was lower at
3.17 percent, but still above its one-year moving average of
1.95 percent.
    Elsewhere, the forint weakened by a quarter of a
percent to 321.95 versus the euro.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1613 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6100   25.5900    -0.08%    +0.38%
 crown      >                                       
 Hungary    <EURHUF=  321.9500  321.1500    -0.25%    -0.27%
 forint     >                                       
 Polish     <EURPLN=    4.2825    4.2800    -0.06%    +0.17%
 zloty      >                                       
 Romanian   <EURRON=    4.7575    4.7556    -0.04%    -2.18%
 leu        >                                       
 Croatian   <EURHRK=    7.4335    7.4270    -0.09%    -0.32%
 kuna       >                                       
 Serbian    <EURRSD=  118.0100  118.0500    +0.03%    +0.25%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1090.70  1086.270    +0.41%   +10.56%
                                       0            
 Budapest             42449.77  42225.87    +0.53%    +8.46%
 Warsaw                2372.32   2391.80    -0.81%    +4.20%
 Bucharest             8304.62   8304.90    -0.00%   +12.47%
 Ljubljana  <.SBITOP    883.75    874.33    +1.08%    +9.88%
            >                                       
 Zagreb                1808.53   1805.33    +0.18%    +3.41%
 Belgrade   <.BELEX1    736.14    739.29    -0.43%    -3.35%
            5>                                      
 Sofia                  579.03    583.32    -0.74%    -2.60%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7150   -0.0990   +230bps    -10bps
            R>                                      
   5-year   <CZ5YT=R    1.6630   -0.0340   +213bps     -5bps
            R>                                      
   10-year  <CZ10YT=    1.8370    0.0080   +185bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6530   -0.1140   +224bps    -12bps
            R>                                      
   5-year   <PL5YT=R    2.2280    0.0070   +269bps     -1bps
            R>                                      
   10-year  <PL10YT=    2.9060    0.0010   +292bps     -2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.15      2.19      2.18      2.02
            <PRIBOR=                                
            >                                       
 Hungary                  0.34      0.50      0.68      0.16
                                                    
 Poland                   1.73      1.73      1.74      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
    
 (Reporting by Sandor Peto, editing by Larry King)
  
 
 
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