January 31, 2019 / 10:26 AM / 6 months ago

CEE MARKETS-Markets jump on Fed comments, Czech crown gives up gains

    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, Jan 31 (Reuters) - Central European markets
firmed across the board after the Federal Reserve signalled that
its interest rate hike cycle may have ended.
    The prospect of lower than expected U.S. interest rates made
risky assets more attractive and also caused some selling of the
dollar whose strength weighed on financial assets in
emerging markets last year.
    The forint hit its strongest levels since May last
year at 315.03 against the euro in overnight international
    The forint retreated to 315.85 by 0919 GMT as the euro
 gave up ground against the dollar, still slightly firmer
from Tuesday's domestic close before the Fed's comments. 
    The zloty touched a 5-week high at 4.2788 against
the euro, before retreating to 4.2804, still up by 0.2 percent.
    The leu drifted further away from record lows hit
last week in response to worries over the government's new tax
on banks. It traded at 4.738, up a quarter of a percent.
    "There has been a bit of panic over the past days and now it
seems that some foreign players have begun ... to throw back
some euros into the market ... but nobody can estimate how long
will it last," said a dealer with a foreign bank in Bucharest.
    Another trader said trading volumes were "pretty large".
    The Czech crown jumped in early trade from a
one-month low set on Tuesday, but soon gave up most of its gain,
to trade at 25.777.
    Czech central bank Governor Jiri Rusnok said on Czech
television late on Wednesday that the bank could deliver between
zero and two interest rate hikes this year.
    One Prague-based dealer said the crown was choppy because
the latest comments from Czech central bankers left the market
unsure about the rate hikes priced in earlier.
    "At the beginning of the year it was sure (of a rate hike),"
the dealer said. "Now it is different. Nobody on the market is
100 percent persuaded of what will happen."
    In the region's equity markets, Bucharest led a rise, with
its bluechip index gaining 0.7 percent.
    Poland's 10-year government bond yield dropped 4 basis
points to below 2.73 percent, near 2-and-1/2-year high territory
below 2.707 percent.
    Hungary's 10-year yield dropped 9 basis points from
Wednesday's fixing to 2.75 percent, and traders projected that
Thursday's Hungarian government bond auctions would
draw strong demand.
    "The international environment helps bonds," one
Budapest-based trader said.
    "The Hungarian central bank's envisaged tightening means it
would fight inflation ... This is a win-win situation for
long-term bonds," the trader added.
            CEE       SNAPSHOT   AT                         
            MARKETS             1019 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7770   25.7900    +0.05%    -0.27%
 crown      >                                       
 Hungary    <EURHUF=  315.8500  315.9700    +0.04%    +1.66%
 forint     >                                       
 Polish     <EURPLN=    4.2804    4.2884    +0.19%    +0.21%
 zloty      >                                       
 Romanian   <EURRON=    4.7380    4.7505    +0.26%    -1.77%
 leu        >                                       
 Croatian   <EURHRK=    7.4195    7.4220    +0.03%    -0.13%
 kuna       >                                       
 Serbian    <EURRSD=  118.3700  118.4500    +0.07%    -0.06%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1039.81  1034.950    +0.47%    +5.40%
 Budapest             41031.15  40862.97    +0.41%    +4.83%
 Warsaw                2371.06   2357.79    +0.56%    +4.15%
 Bucharest             7096.11   7043.64    +0.74%    -3.89%
 Ljubljana  <.SBITOP    839.84    840.38    -0.06%    +4.42%
 Zagreb                1761.81   1762.17    -0.02%    +0.74%
 Belgrade   <.BELEX1    698.55    699.87    -0.19%    -8.29%
 Sofia                  583.15    575.27    +1.37%    -1.90%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.7260   -0.0040   +228bps     -1bps
   5-year   <CZ5YT=R    1.6250   -0.0640   +196bps     -6bps
   10-year  <CZ10YT=    1.7630   -0.0220   +159bps     -1bps
   2-year   <PL2YT=R    1.4830   -0.0180   +204bps     -3bps
   5-year   <PL5YT=R    2.1390   -0.0360   +247bps     -4bps
   10-year  <PL10YT=    2.7280   -0.0430   +256bps     -3bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.07      2.11      2.13      1.99
 Hungary                  0.33      0.53      0.75      0.15
 Poland                   1.73      1.72      1.72      1.72
 Note: FRA  are for ask prices                              
 (Additional reporting by Radu Marinas in Bucharest. Editing by
Jane Merriman)
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