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CEE MARKETS-Zloty firms as inflation data leaves rate hike expectations intact
October 31, 2017 / 2:36 PM / 22 days ago

CEE MARKETS-Zloty firms as inflation data leaves rate hike expectations intact

    * Polish Oct annual CPI drops to 2.1 pct as expected
    * Polish FRAs price in interest rate hike in 12 months
    * Hungarian central bank launches quoting for six-month
BUBOR
    * Figures show foreigners further boosted Czech bond
holdings

 (Recasts with Polish inflation figures, rise of Czech stock
index)
    By Sandor Peto and Anna Wlodarczak
    BUDAPEST/WARSAW, Oct 31 (Reuters) - Poland's zloty firmed on
Tuesday after figures showing annual inflation dropped slightly
in October from a five-year high as forecast left expectations
the central bank will raise interest rates next year intact.  
    Inflation dropped to 2.1 percent from September's 2.2
percent, the highest reading since 2012. The zloty
firmed 0.1 percent to 4.244 against the euro. 
    Forward rate agreements show investors are pricing in a 25
basis point hike in the Polish central bank's key rate --
currently 1.5 percent -- within 12 months.
    Tuesday's inflation figures did not change those
expectations, said Grzegorz Maliszewski, senior economist at
Bank Millennium.
    "In (the) mid term, inflation will accelerate due to demand
factors and base effects, so we maintain the scenario of rate
hike in the second half of next year," he said. 
    The Czech crown also firmed slightly, to 25.657
against the euro.
    A Reuters poll showed analysts expect the Czech central
bank, which began raising interest rates in August, to lift its
0.25 percent two-week repo rate again on Thursday.
    All but one of 16 analysts said they expected a 25 basis
point hike, and one forecast 50 basis points.
    Government figures on Tuesday showed foreign investors
nearly doubled their Czech domestic government bond holdings in
September compared to a year earlier, increasing the risk of a
sell-off if investors no longer expect the crown to strengthen.
    Analysts at Raiffeisen turned their "sell" recommendation
for Czech bonds into a "hold", saying the rise in Czech yields
had created a decent premium over yields on German Bunds. Recent
comments from the European Central Bank signalled Bund yields --
the benchmark for the euro zone -- could stay "at depressed
levels for longer", they said. 
    In contrast to the Polish and Czech central banks, Hungary's
loosening of its monetary policy was further underpinned by its
announcement on Tuesday to extend mandatory quotation to the
six-month BUBOR interbank rates <BUBOR).
    "It can push the rate lower by a few basis points (from 0.07
percent)," one Budapest-based trader said, adding that the bank
would need further measures to meet its goal to push long-term 
yields lower.
    The forint eased 0.1 percent to 311.55 against the
euro.
    In equities markets, Prague's main index reached its
highest level in more than six years, mainly driven by a 2
percent rise in the shares of CEZ to a two-year high. 
    The state-controlled electricity producer said it sold its
power plant in Varna to Bulgaria's SIGDA OOD. 
    
               CEE MARKETS  SNAPSH   AT  1455 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.657  25.666   +0.04   5.26%
                                 0       0       %  
 Hungary                    311.55  311.28  -0.09%  -0.88%
 forint                         00      00          
 Polish zloty               4.2440  4.2473   +0.08   3.77%
                                                 %  
 Romanian leu               4.6010  4.5983  -0.06%  -1.43%
 Croatian                   7.5230  7.5225  -0.01%   0.43%
 kuna                                               
 Serbian                    119.15  119.32   +0.14   3.52%
 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                     1065.5  1064.0   +0.15   +15.6
                                 8       0       %      2%
 Budapest                   39821.  39881.  -0.15%   +24.4
                                47      22              3%
 Warsaw                     2518.5  2517.0   +0.06   +29.2
                                 5       3       %      9%
 Bucharest                  7818.1  7845.5  -0.35%   +10.3
                                 8       1              5%
 Ljubljana                  796.92  796.53   +0.05   +11.0
                                                 %      6%
 Zagreb                     1881.0  1881.0   +0.00  -5.71%
                                 1       1       %  
 Belgrade                   730.72  726.16   +0.63   +1.86
                                                 %       %
 Sofia                      670.66  669.99   +0.10   +14.3
                                                 %      6%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.404   0.108   +115b   +10bp
                                                ps       s
   5-year                    0.723  -0.036   +106b   -6bps
                                                ps  
   10-year                   1.568  -0.045   +119b   -6bps
                                                ps  
 Poland                                                   
   2-year                    1.611  -0.004   +236b   -2bps
                                                ps  
   5-year                    2.662  -0.009   +300b   -3bps
                                                ps  
   10-year                   3.442  -0.002   +306b   -2bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.87    1.06    1.21       0
               IBOR=>                               
 Hungary               <BU    0.07    0.11     0.1    0.03
               BOR=>                                
 Poland                <WI   1.774   1.834   1.927    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting by Bartosz Chmielewski in Warsaw; Editing
by Catherine Evans)
  
 
 

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