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Jason Hovet

CEE MARKETS-Czech crown gains; central banker says room for rate rise

13 Jun 2019

* Crown gains as rate-setter Benda sees room for rate increase * Loose Fed, euro zone growth concern blurs CEE rate outlook * Hungarian rates jump on retail bond sale success By Sandor Peto and Jason Hovet BUDAPEST/PRAGUE, June 13 The crown gained on Thursday after a Czech central bank board member said he still saw room to raise interest rates. Other Central European currencies fell. The remarks by Czech policy-maker Vojtech Benda came in a Bloomberg interview that followed similarly hawkish comments made the governor of the central bank, Jiri Rusnok, on Tuesday. The outlook for Central European interest rates is unclear. The Federal Reserve is expected to cut rates soon and the European Central Bank might eventually follow suit. Central Europe's economies are linked with both regions, especially the euro zone. But surging wages are fuelling inflation in Central Europe, putting pressure on its central banks to raise rates. The uncertainty over rates is the most visible in the Czech Republic, where forward rate agreements price in rate cuts, after eight rate increases since 2017. The crown rose to 25.58 versus the euro by 0844 GMT. The forint and the zloty each fell 0.1%. The leu continued to fall from five-month highs, trading at 4.7245 versus the euro, after April figures showed weak annual growth in industrial output and a widening in the current account deficit in Romania. The central bank is widely expected to fight inflation by tightening liquidity in leu markets, but some analysts said after Tuesday's higher-than-expected inflation data that the bank may discuss a rate increase. In Hungary, the successful introduction of a new retail government bond reduced forint liquidity, casting doubt on the need of a further cut in the central bank's liquidity-creating FX swaps at its meeting on June 25. The overnight BUBOR interbank interest rate has quadrupled since last week, to 0.24 percent, rising above longer maturities. Depressed Bund and U.S. Treasury yields, coupled with the strong retail bond sales, can help Hungary's debt agency AKK to lengthen the average maturity of its outstanding debt, traders said. Government bond yields were mostly flat in the region. Hungary's 10-year bond traded around 2.8%. CEE SNAPSHOT AT MARKETS 1044 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5800 25.5820 +0.01% +0.50% crown > Hungary <EURHUF= 322.2500 322.0000 -0.08% -0.36% forint > Polish <EURPLN= 4.2605 4.2580 -0.06% +0.68% zloty > Romanian <EURRON= 4.7245 4.7235 -0.02% -1.49% leu > Croatian <EURHRK= 7.4170 7.4115 -0.07% -0.09% kuna > Serbian <EURRSD= 117.9800 118.0100 +0.03% +0.27% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1054.36 1051.990 +0.23% +6.87% 0 Budapest 40764.97 40592.32 +0.43% +4.15% Warsaw 2286.98 2282.80 +0.18% +0.45% Bucharest 8577.98 8591.06 -0.15% +16.17% Ljubljana <.SBITOP 872.22 870.54 +0.19% +8.45% > Zagreb 1912.50 1912.85 -0.02% +9.36% Belgrade <.BELEX1 731.91 731.10 +0.11% -3.91% 5> Sofia 577.17 578.63 -0.25% -2.91% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.6860 0.0790 +235bps +8bps R> 5-year <CZ5YT=R 1.5020 -0.0230 +210bps -2bps R> 10-year <CZ10YT= 1.6230 0.0120 +187bps +2bps RR> Poland 2-year <PL2YT=R 1.6380 -0.0260 +231bps -2bps R> 5-year <PL5YT=R 2.0120 -0.0140 +261bps -1bps R> 10-year <PL10YT= 2.5000 -0.0020 +275bps +1bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.15 2.05 1.96 2.17 <PRIBOR= > Hungary 0.29 0.44 0.57 0.18 Poland 1.75 1.72 1.71 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Radu Marinas in Bucharest, editing by Larry King)

UPDATE 1-CEE MARKETS-CPI rise fails to boost Czech crown as dollar consolidates

11 Jun 2019

* Czech CPI rises, CNB chief says hike is optimal next move * Czech markets remain split over interest rate outlook * CEE currencies retreat as dollar decline halts * Poland leads rise in bond yields as money flows into equities (Adds further Czech central bank comments, bonds, stocks) By Sandor Peto and Jason Hovet BUDAPEST/PRAGUE, June 11 A surprise rise in Czech inflation failed to strengthen the crown on Tuesday as Central European currencies pause this week after a rallying to multi-week highs on global dollar selling. The greenback has weakened in the recent weeks on growing expectations for Federal Reserve interest rate cuts but steadied on Tuesday. While inflation has been moderate in developed economies, it has been pushed higher by a surge in wages in the European Union's fast-growing emerging markets. The correlation of the Czech crown's and the forint's euro crosses with the dollar index is the strongest this year. With the dollar consolidating, the forint eased 0.2% to 320.75 against the euro by 1241 GMT. The crown, the zloty and the leu shed 0.1%. Czech annual inflation picked up to 2.9% in May, above the 2.7% forecast by analysts. It would be optimal if the current pause in monetary policy changes is followed by more interest rate growth as rates are still not at normal levels, Czech central bank (CNB) Governor Jiri Rusnok said. That is a change compared to comments suggesting neutrality after the CNB's latest interest rate hike in early May. Core inflation was marginally lower than expected and the new figures bear out the message of the CNB's current forecast, the bank said in a statement, adding that overall inflation pressures were easing. Market participants remained split over the CNB interest rate outlook after the figures. Some analysts predict that the CNB will continue to increase interest rates this year or next, but markets are pricing in an easing as the European Central Bank is also expected to maintain a loose policy. Yields on Czech domestic bonds and forward rate agreements ticked slightly higher, with the 10-year bond yield at around 1.61%. "We (still) have nearly two rate cuts priced in (over the next year) which is strongly overdone," a dealer said. Polish yields also rose, tracking Bunds and other euro zone bonds as investments flowed into riskier equity markets after the United States stepped back from imposing trade tariffs on Mexico. The 10-year Polish yield rose 4 basis points to 2.537%, while Hungary bucked the trend with its 10-year yield falling by 3 basis points to 2.85%. Budapest's main equity index rose 0.6%, mainly driven by an 1.2% rise in OTP Bank shares, which managed to break through a technical line at 12,400 forints after several failed attempts in the past month. CEE SNAPSHOT AT MARKETS 1441 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.6400 25.6200 -0.08% +0.26% crown > Hungary <EURHUF= 320.7500 320.0500 -0.22% +0.10% forint > Polish <EURPLN= 4.2678 4.2630 -0.11% +0.51% zloty > Romanian <EURRON= 4.7236 4.7190 -0.10% -1.47% leu > Croatian <EURHRK= 7.4130 7.4155 +0.03% -0.04% kuna > Serbian <EURRSD= 118.0400 117.9500 -0.08% +0.22% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1063.87 1059.220 +0.44% +7.84% 0 Budapest 41406.56 41159.57 +0.60% +5.79% Warsaw 2298.00 2282.51 +0.68% +0.94% Bucharest 8626.22 8583.26 +0.50% +16.83% Ljubljana <.SBITOP 872.28 879.66 -0.84% +8.46% > Zagreb 1904.73 1889.07 +0.83% +8.92% Belgrade <.BELEX1 731.70 731.88 -0.02% -3.94% 5> Sofia 578.64 581.37 -0.47% -2.66% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.6060 0.0060 +227bps +66bps R> 5-year <CZ5YT=R 1.5360 0.0240 +212bps +61bps R> 10-year <CZ10YT= 1.6890 0.0360 +192bps +26bps RR> Poland 2-year <PL2YT=R 1.6570 0.0050 +232bps +66bps R> 5-year <PL5YT=R 2.0460 0.0900 +263bps +67bps R> 10-year <PL10YT= 2.5570 0.0800 +278bps +31bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.15 2.07 1.97 2.17 <PRIBOR= > Hungary 0.29 0.42 0.55 0.18 Poland 1.75 1.74 1.73 1.72 Note: FRA are for ask prices quotes ************************************************* ************* ($1 = 283.2000 forints) (Reporting by Sandor Peto; Editing by Kirsten Donovan)

CEE MARKETS-Currencies jump on Fed rate outlook, EU warning to Italy

05 Jun 2019

* U.S. rate cut bets, EU warning to Italy help CEE currencies * Polish central bank reiterates rates could stay stable * Czech, Hungarian, Romanian retail sales continue to surge * Polish 10-year bond yield hits 4-year low, tracking Bunds (Recasts with Polish central bank meeting, new comments, bonds, Polish stock exchange) By Sandor Peto and Jason Hovet BUDAPEST/PRAGUE, June 5 Central European currencies extended their gains on Wednesday as expectations for Federal Reserve interest rate cuts hit the dollar and a European Commission warning to Italy over its debt weighed on several crosses of the euro. The region's main currencies set multi-week highs, and Romania's leu a 4-1/2-month high against the euro. The Czech crown, Hungary's forint and the leu firmed in tandem by 0.3% by 1502 GMT. The zloty also gained 0.1%, even though Polish central bank governor Adam Glapinski, at a news conference after a policy meeting, crushed any expectations that a rise in inflation in May might have prompted a less dovish tone. He reiterated that there may be no need to change rates until 2022. At Wednesday's policy meeting, the bank left the benchmark interest rate unchanged at 1.5 percent, as expected. Poland's 10-year government bond yield fell 7 basis points to a 4-year low of 2.5275%, tracking a plunge of the corresponding Bund yield to record lows. Bond yields fell across Europe, except for Italy, and in the United States, driven by bets for lower Fed rates, which weakened the greenback. Dollar-selling often helps Central European currencies. "I do not say that a parallel weakness of the euro and the dollar is not a somewhat confusing backdrop," one Budapest-based dealer said. "But the dollar has been weakened by Fed expectations rather than global growth worries, while global inflation is not on the rise... That is a good combination for currencies in emerging economies that have no growth problems," the dealer added. Surging wages help Central European countries maintain faster growth than the euro zone. Annual growth in retail sales picked up to about 7% in the Czech Republic and Hungary, and slowed to that pace in Romania, according to figures released on Wednesday. The robust growth maintains upwards pressure on consumer prices. One trader said there may be scope "for a possible rate hike" in the Czech Republic after strong economic data this week buoyed the crown after weeks of losses. But traders said regional currency markets remained vulnerable amid continued fears of an escalating global trade war between the United States and other countries. Weak U.S. payroll figures released on Wednesday underlined those risks. Investors are also concerned about demand in China, the world's second biggest economy which accounts for half of global consumption of industrial metals. Central Europe is not heavily exposed in that sector, but shares in Polish copper producer KGHM plunged 3.4% on Wednesday, a key factor in the overall 0.5% fall in Warsaw's bluechip stock index. CEE SNAPSHOT AT MARKETS 1702 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.6550 25.7400 +0.33% +0.20% crown > Hungary <EURHUF= 321.2500 322.0400 +0.25% -0.05% forint > Polish <EURPLN= 4.2748 4.2796 +0.11% +0.35% zloty > Romanian <EURRON= 4.7200 4.7325 +0.26% -1.40% leu > Croatian <EURHRK= 7.4150 7.4185 +0.05% -0.07% kuna > Serbian <EURRSD= 117.7500 117.8700 +0.10% +0.47% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1052.68 1053.830 -0.11% +6.70% 0 Budapest 40948.92 41157.02 -0.51% +4.62% Warsaw 2223.27 2233.75 -0.47% -2.34% Bucharest 8615.37 8472.73 +1.68% +16.68% Ljubljana <.SBITOP 881.34 883.33 -0.23% +9.58% > Zagreb 1858.73 1846.80 +0.65% +6.29% Belgrade <.BELEX1 733.01 733.50 -0.07% -3.77% 5> Sofia 577.63 580.11 -0.43% -2.83% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.5990 0.0020 +226bps +3bps R> 5-year <CZ5YT=R 1.5010 0.0110 +210bps +4bps R> 10-year <CZ10YT= 1.7080 0.0620 +193bps +8bps RR> Poland 2-year <PL2YT=R 1.6400 -0.0380 +231bps -1bps R> 5-year <PL5YT=R 1.9950 -0.0820 +260bps -5bps R> 10-year <PL10YT= 2.5470 -0.0760 +277bps -6bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.18 2.09 2.01 2.18 <PRIBOR= > Hungary 0.30 0.43 0.55 0.19 Poland 1.74 1.71 1.70 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting Karin Strohecker in London, Editing by Gareth Jones)

CEE MARKETS-Crown leads rise on retail surge, Poland seen holding rates

05 Jun 2019

* Polish central bank expected to keep rates at record lows * Czech, Hungarian, Romanian retail sales continue to surge * Czech crown sets 5-week high, to levels around last rate hike * Polish 10-year bonds trade near 3-1/2-year low yields By Sandor Peto and Jason Hovet BUDAPEST/PRAGUE, June 5 The Czech crown firmed to a 5-week high on Wednesday as surging retail sales maintained upwards pressure on inflation in Central European emerging markets, in contrast to developed economies. The Polish central bank (NBP) was seen keeping interest rates on hold at its meeting on Wednesday, while expectations for a Federal Reserve cut kept the dollar near 7-week lows against a basket of currencies. The region's main currencies set multi-week highs against the euro in the past days, and a 4-month high in the case of the leu, which gave up some ground on Wednesday. The crown gained 0.3 percent, outperforming the zloty and the forint, to 25.67 by 0847 GMT. It reached its strongest level since early May when the Czech central bank (CNB) increased its main interest rate the last time. Buyers shrugged off Tuesday's comments from CNB board member Tomas Holub who said interest rates were likely to stay stable in the near term. "The flow from the last two weeks dragging (the crown weaker) just disappeared in the last two day with optimistic data figures pointing to some room for a possible hike," one trader said. Annual growth in retail sales picked up to about 7 percent in the Czech Republic and Hungary, and slowed to that pace in Romania. The robust growth maintains upwards pressure on consumer prices, suggesting that inflation may pick further up in the region. May data released in Poland on Tuesday showed some pick-up. However, Polish annual inflation at 2.3 percent remains below its regional peers and expectations. Polish core inflation may even decline, Santander bank analysts said in a note. Poland's 10-year government bond yield dropped 1 basis point to 2.596 percent. It traded near its lowest levels since November 2015 as the NBP was unlikely to change its record low interest rates nor its guidance for stability at its meeting. Polish markets also shrugged off a change at the helm of the finance ministry in a government reshuffle on Tuesday, which analysts said was unlikely to change policy. Hungary's more volatile yields consolidated after a jump of 8 basis point in the 10-year paper to 2.89 percent on Tuesday, following days of sharp falls as global markets were also jittery. "Hungary's monetary policy is loose... and when global developments seem to justify that, yields slump, but negative impacts can boost them," one trader said. "If global trade tensions are resolved... our (bond) yields can easily fall 30-40 basis points," the trader added. CEE SNAPSHOT AT MARKETS 1047 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.6700 25.7400 +0.27% +0.14% crown > Hungary <EURHUF= 321.8500 322.0400 +0.06% -0.24% forint > Polish <EURPLN= 4.2790 4.2796 +0.01% +0.25% zloty > Romanian <EURRON= 4.7340 4.7325 -0.03% -1.69% leu > Croatian <EURHRK= 7.4170 7.4185 +0.02% -0.09% kuna > Serbian <EURRSD= 117.7600 117.8700 +0.09% +0.46% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1058.60 1053.830 +0.45% +7.30% 0 Budapest 41025.86 41157.02 -0.32% +4.82% Warsaw 2227.74 2233.75 -0.27% -2.15% Bucharest 8514.60 8472.73 +0.49% +15.32% Ljubljana <.SBITOP 881.53 883.33 -0.20% +9.61% > Zagreb 1857.80 1846.80 +0.60% +6.23% Belgrade <.BELEX1 733.50 733.50 +0.00% -3.70% 5> Sofia 582.70 580.11 +0.45% -1.98% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.7070 0.1090 +235bps +11bps R> 5-year <CZ5YT=R 1.5010 0.0110 +207bps +1bps R> 10-year <CZ10YT= 1.7060 0.0600 +191bps +6bps RR> Poland 2-year <PL2YT=R 1.6750 -0.0030 +232bps +0bps R> 5-year <PL5YT=R 2.0590 -0.0180 +263bps -2bps R> 10-year <PL10YT= 2.6150 -0.0080 +282bps -1bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.18 2.12 2.05 2.18 <PRIBOR= > Hungary 0.34 0.44 0.55 0.19 Poland 1.74 1.75 1.73 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Reporting by Sandor Peto, Editing by William Maclean)

Czech protesters demand PM Babis's fall over investigation, business ties

04 Jun 2019

PRAGUE Tens of thousands of Czechs hit the streets on Tuesday to demand the resignation of billionaire Prime Minister Andrej Babis over alleged conflicts of interest involving his former business empire and an investigation into a decade-old EU subsidy.

CORRECTED-New Czech minister sees no one ruled out of 5G, nuclear power expansion

02 May 2019

* Karel Havlicek starts as Czech industry minister on Tuesday

Reality check: Dip in growth has Czechs pinching pennies after splurge

15 Apr 2019

PRAGUE A year after embarking on a record spending splurge, the Czech Republic, one of the European Union's star fiscal performers, is falling back into deficit and has started tightening its belt to prevent an economic slowdown from wrecking its budget.

UPDATE 1-Czech central banker denies actions at turn of 2018/19 to stabilise crown

08 Mar 2019

PRAGUE, March 8 The Czech National Bank (CNB) on Friday denied speculation that it might have acted through its foreign counterparts to limit crown weakening at the end of last year.

Online boom delivers big returns for central European warehouses

05 Mar 2019

PRAGUE Online retailers racing to build warehouses in central Europe are propelling the region's real estate market to new heights and Asian investors on the hunt for higher yields are getting in on the act.

Czech telecoms regulator to launch 5G auction bidding in November

27 Feb 2019

PRAGUE, Feb 27 The Czech telecoms regulator CTU aims to launch an auction of next-generation 5G frequencies in early November, seeking to attract a fourth new operator to boost competition in a market among the most expensive for customers in Europe.

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