May 8, 2019 / 9:26 AM / 6 months ago

CEE MARKETS-Robust output fails to support forint, Serbian rates seen on hold

    * Forint eases though Hungary's industrial output surges
    * Hungarian CPI data due on Thursday seen showing further
rise
    * Serbian central bank meets, seen keeping rates on hold

    By Sandor Peto and Aleksandar Vasovic
    BUDAPEST/BELGRADE, May 8 (Reuters) - Hungary's forint edged
towards 5-month lows on Wednesday as robust industrial output
data did not change market expectations that the central bank
(NBH) will not rush into further monetary tightening despite a
continued rise in inflation.
    The forint eased 0.1 percent to 324.4 against the
euro by 0815 GMT, approaching its weakest levels since November,
set at 324.85 last week.
    Hungarian government bond yields rose by 1-2 basis points,
with the 10-year paper trading at 3.33 percent.
    April data due on Thursday are expected to show a rise in
the annual inflation to around 4 percent, the top of the NBH's
2-4 percent target range.
    The forint weakened almost 4 percent in the past seven weeks
as the NBH increased its overnight deposit rate slightly at its
March meeting but dropped its guidance for gradual monetary
tightening.
    Surging wages have been boosting domestic demand in Central
Europe, fuelling a rise in consumer prices, but an economic
slowdown and persistent low interest rates in the euro zone have
dampened inflation pressure.
    Data released by Hungary on Wednesday showed that industrial
output surged by an annual 8 percent in March, exceeding all
forecasts.
    Analysts attributed the jump to a pick-up in the auto
industry, after wage strikes at the local plants of companies
including Audi cut production early this year.
    The figures herald economic growth of around 5 percent this
year, ING analyst Peter Virovacz said in a note.
    "The big question, however, is when the reappearing bogey of
 trade war and the weakness of Germany's industry will have an
impact," he said, adding that Hungary's industry could grow by
about 6 percent this year.
    The U.S.-China trade war has been weighing on mood in
emerging markets.
    The region's blooming vehicle industry, a key driver of
growth, could get a hit if Washington introduces tariffs on car
imports from Europe.
    Germany also released better-than-expected March industrial
output data on Wednesday, but the outlook remained gloomy.

    The data and some rebound in the euro did not provide
support for the forint, but the zloty firmed a shade
to 4.289.
    Elsewhere, the dinar firmed slightly ahead of the
Serbian central bank's meeting where it is expected to keep its
benchmark rate on hold as inflation remains well within its
target despite robust economic growth.
    The bank has been buying the dinar in the market this year
to stem its strengthening, partly driven by domestic spending by
Serbians who work abroad.
    "Also there were several issuances of dinar-indexed T-bonds
which boosted demand," one dealer said, adding that the currency
could weaken to around 118.5 soon.
     
            CEE       SNAPSHOT   AT                         
            MARKETS             1015 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=    0.0000   25.7410  #DIV/0!   #DIV/0!
 crown      >                                       
 Hungary    <EURHUF=  324.4000  324.1200    -0.09%    -1.02%
 forint     >                                       
 Polish     <EURPLN=    4.2890    4.2919    +0.07%    +0.01%
 zloty      >                                       
 Romanian   <EURRON=    4.7579    4.7565    -0.03%    -2.18%
 leu        >                                       
 Croatian   <EURHRK=    7.4070    7.4095    +0.03%    +0.04%
 kuna       >                                       
 Serbian    <EURRSD=  117.8900  117.9700    +0.07%    +0.35%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1063.50  1063.500    +0.00%    +7.80%
                                       0            
 Budapest             41273.50  41084.57    +0.46%    +5.45%
 Warsaw                2239.89   2233.80    +0.27%    -1.61%
 Bucharest             8407.66   8419.18    -0.14%   +13.87%
 Ljubljana  <.SBITOP    882.21    881.04    +0.13%    +9.69%
            >                                       
 Zagreb                1831.84   1838.28    -0.35%    +4.75%
 Belgrade   <.BELEX1    737.89    736.38    +0.21%    -3.12%
            5>                                      
 Sofia                  567.99    567.70    +0.05%    -4.45%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6070   -0.1710   +221bps    -18bps
            R>                                      
   5-year   <CZ5YT=R    1.7400   -0.0020   +219bps     -2bps
            R>                                      
   10-year  <CZ10YT=    1.8660   -0.0010   +189bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6850    0.0100   +229bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.3290    0.0050   +277bps     -1bps
            R>                                      
   10-year  <PL10YT=    2.9740   -0.0110   +300bps     -2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.25      2.26      2.26      2.21
            <PRIBOR=                                
            >                                       
 Hungary                  0.37      0.53      0.70      0.16
                                                    
 Poland                   1.75      1.76      1.78      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto;
Editing by Andrew Cawthorne)
  
 
 
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