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Sandor Peto

CEE MARKETS-Forint rallies as data hits zloty and leu tests record low

2:06pm GMT

* Forint sets 7-month high vs euro, 6-1/2-month high vs zloty * Forint buoyed by hawkish comments, weak data weigh on zloty * Leu retests record low at 4.7 vs euro set in June 2018 * Government bond yields continue to rise faster than USTs (Adds leu, which tested record lows and analyst comment) By Sandor Peto and Alicja Ptak BUDAPEST/WARSAW, Jan 18 The Hungarian forint hit a seven-month high against the euro on Friday and gained against the Polish zloty after data pointed to slower growth in Poland. The forint has rallied since Wednesday when Hungarian central bank (NBH) Deputy Governor Marton Nagy said monetary tightening could start if core inflation reached or exceeded 3 percent, the midpoint of the bank's target range. On Friday, the forint touched a 7-month high at 317.85 against the euro, the region's main reference currency. At 1333 GMT, it was half a percent higher than Thursday's close at 318.15, and up by almost 2 percent from a one-month low just before Nagy's comments. Its Central European peers eased. The leu retested record lows last reached in June 2018 at 4.7 versus the euro as the mood in Romanian markets remained poisoned by new taxes levied on banks' assets, which are linked to interbank interest rates. The Romanian central bank keeps the currency in a managed float, and investors watch the market for signs of intervention from the bank. "It remains to be seen if, at this level, we will have the first 'line in the sand' from the central bank, which so far has only smoothed the Romanian leu's weakening trend," ING analysts said in a morning note. Against the zloty, the forint reached a 6-1/2-month high, bid at 73.95. The Polish unit shed 0.1 percent against the euro after weaker-than-expected December industrial output, wages and producer price growth data. "The data on wages will reinforce the MPC's (central bank's) conviction that keeping rates stable is the right thing to do, so the weaker data strengthen the perspective of a long period of stable rates," Piotr Piekos, senior economist at Pekao SA, said. The figures reflect a slowdown from last year's 5 percent growth, but the economy remains too robust to justify a rate cut priced in by markets earlier this week, analysts said. Government bond yields in Warsaw, and also in Budapest and Prague, continued to track this week's rebound in U.S. and German yields, after weeks of decline which was helped by a fall in inflation across the region in the past months. The yield on Poland's 10-year bonds rose 4 basis points to 2.84 percent, a 9-day high, compared with a 1 basis point rise in the corresponding U.S. Treasury yield. Hungary's 10-year bonds traded at 2.91 percent, up 5 basis points, but off an early peak of 3 percent. CEE SNAPSHOT AT MARKETS 1433 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5860 25.5420 -0.17% +0.47% crown > Hungary <EURHUF= 318.1500 319.8500 +0.53% +0.92% forint > Polish <EURPLN= 4.2913 4.2890 -0.05% -0.04% zloty > Romanian <EURRON= 4.6990 4.6940 -0.11% -0.96% leu > Croatian <EURHRK= 7.4300 7.4265 -0.05% -0.27% kuna > Serbian <EURRSD= 118.3800 118.3100 -0.06% -0.07% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1016.94 1014.880 +0.20% +3.08% 0 Budapest 41031.37 41180.05 -0.36% +4.84% Warsaw 2367.26 2358.97 +0.35% +3.98% Bucharest 7285.06 7184.84 +1.39% -1.34% Ljubljana <.SBITOP 843.45 835.91 +0.90% +4.87% > Zagreb 1765.76 1756.57 +0.52% +0.97% Belgrade <.BELEX1 699.11 697.56 +0.22% -8.22% 5> Sofia 567.24 566.77 +0.08% -4.58% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.8880 -0.0580 +248bps -6bps R> 5-year <CZ5YT=R 1.7810 -0.0010 +209bps -2bps R> 10-year <CZ10YT= 1.8750 0.0410 +162bps +3bps RR> Poland 2-year <PL2YT=R 1.3900 -0.0020 +198bps +0bps R> 5-year <PL5YT=R 2.2610 0.0390 +257bps +2bps R> 10-year <PL10YT= 2.8560 0.0350 +260bps +2bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.15 2.21 2.25 2.01 <PRIBOR= > Hungary 0.34 0.60 0.86 0.14 Poland 1.73 1.73 1.73 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Anna Wlodarczak in Warsaw, Luiza Ilie and Radu Marinas in Bucharest; Editing by Alexander Smith and Mark Potter)

CEE MARKETS-Forint finds 7-month high against euro, zloty hit by weak data

10:59am GMT

* Forint sets 7-month high vs euro, 2-month high vs zloty * Forint buoyed by hawkish comments, weak data weigh on zloty * Government bond yields continue to rise faster than USTs By Sandor Peto and Alicja Ptak BUDAPEST/WARSAW, Jan 18 The Hungarian forint hit a seven-month high against the euro on Friday and gained against the Polish zloty after data pointed to slower growth in Poland. The forint has rallied since Wednesday when Hungarian central bank (NBH) Deputy Governor Marton Nagy said monetary tightening could start if core inflation reached or exceeded 3 percent, the midpoint of the bank's target range. On Friday the forint touched a 7-month high at 318.7 against the euro, the region's main reference currency. At 1008 GMT it was 0.3 percent higher at 318.92, and up 1.7 percent from a one-month low just before Nagy's comments. Against the zloty it reached a 2-month high, bid at 74.1, as the Polish currency shed 0.1 percent against the euro after weaker-than-expected December industrial output, wages and producer price growth data. The zloty/forint cross is not heavily traded, but its changes indicate divergences in monetary policy expectations. Poland's annual industrial output growth at 2.8 percent was slightly more than half the rate forecast by analysts. Wages grew by 6.1 percent, less than expected, and the annual industrial producer price index dropped more than expected, to 2.2 percent. "The data on wages will reinforce the MPC's (central bank's) conviction that keeping rates stable is the right thing to do, so the weaker data strengthen the perspective of a long period of stable rates," Piotr Piekos, senior economist at Pekao SA, said. The figures reflect a slowdown from last year's 5 percent growth, but the economy remains too robust to justify a rate cut priced in by markets earlier this week, analysts said. Government bond yields in Warsaw, and also in Budapest and Prague, continued to track this week's rebound in U.S. and German yields, after weeks of decline which was helped by a fall in inflation across the region in the past months. "(The yield rise) is a correction," said Mateusz Milewski, a dealer at mBank. "Earlier a fall in yields was linked to a heavy drop in derivatives. The swap curve had one interest rate cut priced in. Now this move has ended," he added. The yield on Poland's 10-year bonds rose 4 basis points to 2.84 percent, a 9-day high, compared with a 2 basis point rise in the corresponding U.S. Treasury yield. Hungary's 10-year bonds traded at 2.96 percent, off an early peak of 3 percent, but higher by 10 basis points from Thursday's fixing. CEE SNAPSHOT AT MARKETS 1108 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5530 25.5420 -0.04% +0.60% crown > Hungary <EURHUF= 318.9200 319.8500 +0.29% +0.68% forint > Polish <EURPLN= 4.2944 4.2890 -0.13% -0.11% zloty > Romanian <EURRON= 4.6950 4.6940 -0.02% -0.87% leu > Croatian <EURHRK= 7.4330 7.4265 -0.09% -0.31% kuna > Serbian <EURRSD= 118.2500 118.3100 +0.05% +0.04% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1018.24 1014.880 +0.33% +3.21% 0 Budapest 41183.83 41180.05 +0.01% +5.22% Warsaw 2372.60 2358.97 +0.58% +4.22% Bucharest 7305.10 7184.84 +1.67% -1.06% Ljubljana <.SBITOP 841.34 835.91 +0.65% +4.61% > Zagreb 1762.21 1756.57 +0.32% +0.77% Belgrade <.BELEX1 698.78 697.56 +0.17% -8.26% 5> Sofia 567.79 566.77 +0.18% -4.49% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.7480 -0.1980 +233bps -21bps R> 5-year <CZ5YT=R 1.7740 -0.0080 +207bps -3bps R> 10-year <CZ10YT= 1.8580 0.0230 +159bps -1bps RR> Poland 2-year <PL2YT=R 1.4060 0.0140 +199bps +1bps R> 5-year <PL5YT=R 2.2570 0.0350 +256bps +1bps R> 10-year <PL10YT= 2.8600 0.0390 +259bps +1bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.15 2.21 2.25 2.01 <PRIBOR= > Hungary 0.32 0.60 0.87 0.14 Poland 1.73 1.73 1.73 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Anna Wlodarczak in Warsaw; Editing by Alexander Smith)

CEE MARKETS-Forint rallies as Hungarian, Czech rate setters hint at tightening

17 Jan 2019

* Forint surges further to 5-month high on hawkish comments * Czech central banker sees more though slower rate hikes * Hungarian, Romanian bond yields jump at auctions (Recasts with continuing forint rally, comments from Czech central bank chief, auctions results) By Sandor Peto BUDAPEST, Jan 17 The forint extended gains on Thursday, rallying to 5-month highs against the euro on comments from Hungarian central bank (NBH) Deputy Governor Marton Nagy suggesting that monetary tightening may be near. The bank's base rate has been at a record low of 0.9 percent since 2016, and became Central Europe's lowest rate after several hikes by the Czech central bank (CNB) since 2017. Headline inflation has sharply retreated in the region in the past months, but the NBH's key core inflation measure excluding tax effects rose to 2.9 percent in December. Nagy said on Wednesday that monetary tightening could start if the rate reached or exceeded 3 percent, the midpoint of the bank's target range. The comments bolstered the forint by 1.5 percent from Wednesday's lows to a 5-month high of 319.35 against the euro by Thursday. Further gains towards 7-month highs at 319 are possible, dealers said. One dealer said the rally might be overdone, though it might signal a shift into ranges between 319 and 322 from the past months' typical 321-324 channel. "We should not expect a rate hike to come right after core inflation reaches 3 percent," the dealer said, adding that the bank was more likely to tighten conditions by cutting the liquidity from its fx swap tool. Market participants said hints at tighter policy supported the forint, and also the crown which was steady at 25.54 versus the euro, but traded near its strongest levels in 4 months. Soft price index figures raised some question marks over further CNB rate increases. But Governor Jiri Rusnok told Czech Radio on Thursday that "some moderate rise can be assumed", even though the pace "will be definitely much slower than last year". A possible uptick in hedging deals by exporters after a dip in activity last quarter can also support the crown, CSOB analysts said in note. While Nagy's comments boosted the forint, they added fuel to an ongoing upwards correction in Hungarian bond yields after a big decline since October, traders said. Yields jumped at the Hungarian and Romanian bond auctions on Thursday, but demand was high enough to increase Hungary's sale above the plan at a top-up tender. "The yield rise lost steam in the afternoon, but looking at the momentum, there may be room for some further increase," one Budapest-based trader said. CEE SNAPSHOT AT MARKETS 1523 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5400 25.5410 +0.00% +0.65% crown > Hungary <EURHUF= 319.4500 321.4000 +0.61% +0.51% forint > Polish <EURPLN= 4.2845 4.2825 -0.05% +0.12% zloty > Romanian <EURRON= 4.6930 4.6876 -0.12% -0.83% leu > Croatian <EURHRK= 7.4280 7.4265 -0.02% -0.24% kuna > Serbian <EURRSD= 118.3500 118.3000 -0.04% -0.04% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1015.07 1019.000 -0.39% +2.89% 0 Budapest 40973.73 40933.04 +0.10% +4.69% Warsaw 2354.13 2364.17 -0.42% +3.40% Bucharest 7200.63 7077.10 +1.75% -2.48% Ljubljana <.SBITOP 835.91 827.54 +1.01% +3.94% > Zagreb 1756.19 1752.38 +0.22% +0.42% Belgrade <.BELEX1 697.56 704.25 -0.95% -8.42% 5> Sofia 566.77 563.49 +0.58% -4.66% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.8780 0.1120 +248bps +10bps R> 5-year <CZ5YT=R 1.7730 0.0180 +210bps +1bps R> 10-year <CZ10YT= 1.8550 0.0180 +162bps +1bps RR> Poland 2-year <PL2YT=R 1.3760 -0.0380 +197bps -5bps R> 5-year <PL5YT=R 2.2330 0.0330 +256bps +2bps R> 10-year <PL10YT= 2.8380 0.0580 +261bps +5bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.15 2.21 2.25 2.01 <PRIBOR= > Hungary 0.32 0.59 0.85 0.14 Poland 1.73 1.73 1.73 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Luiza Ilie in Bucharest and Jason Hovet in Prague Editing by Mark Heinrich)

CEE MARKETS-Romanian bond yield rises ahead of auction, bucking region

17 Jan 2019

* Yields drop elsewhere, good auction seen in Hungary * Forint yields ground after surge on hawkish comments By Sandor Peto BUDAPEST, Jan 17 Romanian 10-year government bond yields traded at 3-month highs ahead of an auction on Thursday, bucking a retreat elsewhere in Central Europe, as worries over Bucharest's tax increases continue to weigh on Romanian markets. The 2019 hikes, announced four weeks ago, hit the bank and energy sectors and wiped a fifth off Bucharest's stock index, also keeping the leu under pressure over worries about the Romanian business environment. The currency traded at 4.689 versus the euro at 0926 GMT, a touch weaker but near 7-month lows reached on Wednesday. The Romanian central bank, which keeps the leu in a managed float regime, probably intervened in the market "to smooth the speed of the Romanian leu's weakening, rather than stop/reverse it," ING analysts said in a note. "The usual spike in turnover ahead of local fixing seems to confirm that the NBR remains hands on," they said. The analysts added that the government could cut its 10-year bond auction on Thursday, allocating papers at the top end of secondary market yields around 5.05 percent. Romanian 10-year papers were quoted around 5.06 percent, their highest level since Oct. 8. A sharp decline in inflation in the region in the past months, and a fall in U.S. yields, prompted a plunge in bond yields in Central Europe, including Romania, late last year. The decline in Hungary and Poland continued this year, but Romanian bond prices have given up all of their gains. On Thursday, Hungary and Poland's long-term yields dropped slightly, following a jump on Wednesday tracking a more moderate rise in core market yields after British Prime Minister Theresa May's European Union exit deal was rejected by parliament. Hungary's second government bond auction this year could draw healthy demand on Thursday, a Budapest-based trader said. "This is the last auction of the (10-year) 27/A bonds, and I expect good interest...There was good demand at the last auction for that bond, too," the trader said. The bonds traded at 2.77 percent in the secondary market, a touch lower from Wednesday's fixing. The forint and the zloty eased 0.1 percent versus the euro following a surge on Wednesday after Hungarian central bank Deputy Governor Marton Nagy said monetary tightening could start if core inflation rises to 3 percent. The forint was trading at 321.7. "After a 3-forint firming in the exchange rate, today's slight correction is natural," a dealer said, adding that 321.3 remained a strong resistance level. CEE SNAPSHOT AT MARKETS 1026 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5380 25.5410 +0.01% +0.66% crown > Hungary <EURHUF= 321.7000 321.4000 -0.09% -0.19% forint > Polish <EURPLN= 4.2860 4.2825 -0.08% +0.08% zloty > Romanian <EURRON= 4.6890 4.6876 -0.03% -0.75% leu > Croatian <EURHRK= 7.4275 7.4265 -0.01% -0.24% kuna > Serbian <EURRSD= 118.3500 118.3000 -0.04% -0.04% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1019.17 1019.000 +0.02% +3.31% 0 Budapest 40797.00 40933.04 -0.33% +4.24% Warsaw 2369.73 2364.17 +0.24% +4.09% Bucharest 7099.29 7077.10 +0.31% -3.85% Ljubljana <.SBITOP 832.92 827.54 +0.65% +3.56% > Zagreb 1756.92 1752.38 +0.26% +0.46% Belgrade <.BELEX1 698.88 704.25 -0.76% -8.25% 5> Sofia 563.91 563.49 +0.07% -5.14% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.7090 -0.0580 +231bps -6bps R> 5-year <CZ5YT=R 1.7760 0.0210 +212bps +2bps R> 10-year <CZ10YT= 1.8300 -0.0060 +161bps -1bps RR> Poland 2-year <PL2YT=R 1.3680 -0.0460 +197bps -5bps R> 5-year <PL5YT=R 2.1970 -0.0030 +254bps +0bps R> 10-year <PL10YT= 2.7810 0.0010 +256bps +0bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.15 2.21 2.25 2.01 <PRIBOR= > Hungary 0.32 0.58 0.77 0.13 Poland 1.73 1.73 1.73 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Luiza Ilie in Bucharest and Jason Hovet in Prague Editing by Mark Heinrich)

CEE MARKETS-Brexit boosts yields, central bank comments bolster forint

16 Jan 2019

* Hungarian bond yields sharply reverse plunge after Brexit vote * Forint is near strongest levels since Aug, off 1-month low * Hungarian central banker draws road map for tightening * Crown eases after mild PPI, defying hawkish central banker * (Adds further forint gains, comments on crown, rebound of Czech bank stocks) By Sandor Peto BUDAPEST, Jan 16 Central European government bond yields rose on Wednesday due to a shake-up of positions after British Prime Minister Theresa May's plan for an orderly exit from the European Union collapsed. A disorderly exit may hurt regional trade, with Poland most exposed. Hungary's recently illiquid forint fell to a one-month low of 324.25 against the euro after the British parliament vote on Tuesday. But later it recovered to near its strongest levels since August, trading at 321.48 at 1447 GMT, up half a percent on the day. It jumped after Deputy Governor Marton Nagy revealed the National Bank of Hungary's (NBH) so far clearest roadmap for monetary tightening. He said the bank, which has interest rates at record lows, could start to tighten policy once core inflation reaches 3 percent, the midpoint of the bank's 2-4 percent target. December core inflation measures were already close to that level. Headline inflation fell to 2.7 percent, adding fuel to a decline in Hungarian government bond yields. A sharp retreat in inflation in Central Europe in the past months, driven by a fall in crude prices, helped government bond yields track a plunge in U.S. and German yields, led by Hungary. The country's 10-year yield fell further on Tuesday, dipping below the corresponding Polish yield the first time since June last year. But a selloff after the Brexit vote fully erased Tuesday's 10 basis point decline on Wednesday, when the bonds were fixed at 2.79 percent. Poland's 10-year yield, which reached par with U.S. Treasuries on Tuesday, rose 4 basis points to 2.77 percent, compared with their U.S. peer's 2.739 percent. The zloty rebounded from an early fall to trade up a quarter of a percent at 4.2828 versus the euro. The crown was down 0.1 percent at 25.561, after Czech industrial producer price growth slowed to 2.4 percent, below analysts' 3.2 percent forecast, even though central banker Vojtech Benda said rate increases could continue. But the new data corroborated views in markets that the bank would not hike rates anytime soon, said Viktor Zeisel, analyst of Komercni Banka in a note. "We believe they are wrong this time," he said, adding that core inflation and wage growth would remain sound, and likely lead to a rate hike in February and two more in the rest of 2019. In stock markets, Prague's bluechip index rose by 1.4 percent, driven by a recovery of financial sector shares from losses in the past days, including a 3.9 percent rise in Komercni. CEE SNAPSHOT AT MARKETS 1547 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5610 25.5420 -0.07% +0.57% crown > Hungary <EURHUF= 321.4800 323.2000 +0.54% -0.12% forint > Polish <EURPLN= 4.2828 4.2937 +0.25% +0.16% zloty > Romanian <EURRON= 4.6860 4.6807 -0.11% -0.68% leu > Croatian <EURHRK= 7.4270 7.4270 +0.00% -0.23% kuna > Serbian <EURRSD= 118.3700 118.3900 +0.02% -0.06% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1017.54 1004.030 +1.35% +3.14% 0 Budapest 40625.70 40600.26 +0.06% +3.80% Warsaw 2356.79 2344.56 +0.52% +3.52% Bucharest 7064.97 7060.24 +0.07% -4.32% Ljubljana <.SBITOP 830.65 818.34 +1.50% +3.28% > Zagreb 1751.99 1747.60 +0.25% +0.18% Belgrade <.BELEX1 704.25 697.73 +0.93% -7.54% 5> Sofia 563.27 565.56 -0.40% -5.25% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.8140 0.0500 +242bps +4bps R> 5-year <CZ5YT=R 1.7580 0.0580 +210bps +3bps R> 10-year <CZ10YT= 1.8240 0.0570 +159bps +3bps RR> Poland 2-year <PL2YT=R 1.3960 0.0410 +200bps +3bps R> 5-year <PL5YT=R 2.2140 0.0460 +255bps +2bps R> 10-year <PL10YT= 2.7930 0.0340 +256bps +1bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.15 2.19 2.20 2.01 <PRIBOR= > Hungary 0.30 0.52 0.77 0.13 Poland 1.72 1.71 1.73 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Radu Marinas in Bucharest and Jason Hovet in Prague; Editing by Mark Potter and Andrew Cawthorne)

CEE MARKETS-Yields jump on Brexit, forint recovers on central bank comments

16 Jan 2019

* Hungarian bond yields sharply reverse plunge * Forint reverses early losses on central banker remarks * Crown eases after mild PPI, defying hawkish central banker * Leu weaker, central bank may have bought it - analysts By Sandor Peto BUDAPEST, Jan 16 Central European government bond yields rose on Wednesday due to a shake-up of positions after British Prime Minister Theresa May's plan for an orderly exit from the European Union collapsed in parliament on Tuesday. A disorderly British exit from the EU may hurt the region's trade, with Poland most exposed. Technical factors and thin turnover are also making Hungary's forint vulnerable to shifts in sentiment, dealers said. The currency, which made several failed attempts in the past three weeks to break through resistance around 321 versus the euro, touched a one-month low of 324.25 in early trade. But it had rebounded to 322.5 by 1036 GMT, up 0.2 percent from Tuesday, after Hungarian central bank (NBH) Deputy Governor Marton Nagy said the bank could start to normalise policy if core inflation rises above 3 percent. A sharp retreat in inflation in Central Europe in the past months, driven by a fall in crude prices, helped government bond yields track a plunge in U.S. and German yields, led by Hungary. The country's 10-year yield fell further on Tuesday, dipping below the corresponding Polish yield the first time since June last year, after December figures showed a surprise fall in annual headline inflation to 2.7 percent. But a sell-off after the Brexit vote fully erased the 10 basis point decline on Wednesday, when the bonds traded at 2.82 percent, up 14 basis points from Tuesday's fixing. A rise in core inflation to near the NBH's 3 percent target shifted into the focus of attention, market participants said. "There is a gradual increasing tendency," KBC analysts said in a note. "(Core inflation figures) suggest that the room to maintain the current loose monetary policy is disappearing," they added. Poland's 10-year yield, which reached par with U.S. Treasuries on Tuesday, rose 2 basis points to 2.757 percent, compared with their U.S. peer's 2.735 percent. The zloty rebounded from an early fall to trade up 0.2 percent at 4.286 versus the euro. The crown was down 0.1 percent at 25.577, after Czech industrial producer price growth slowed to 2.4 percent, below analysts' 3.2 percent forecast, even though central banker Vojtech Benda said rate increases could continue. The leu was also a touch weaker at 4.6838. Analysts said the Romanian central bank, which smoothes the currency's volatility in a managed float regime, may have intervened in the market on Tuesday when the leu tested 4.69, its weakest since June last year. CEE SNAPSHOT AT MARKETS 1136 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5770 25.5420 -0.14% +0.51% crown > Hungary <EURHUF= 322.5000 323.2000 +0.22% -0.44% forint > Polish <EURPLN= 4.2860 4.2937 +0.18% +0.08% zloty > Romanian <EURRON= 4.6838 4.6807 -0.07% -0.64% leu > Croatian <EURHRK= 7.4270 7.4270 +0.00% -0.23% kuna > Serbian <EURRSD= 118.3000 118.3900 +0.08% +0.00% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1008.18 1004.030 +0.41% +2.19% 0 Budapest 40585.27 40600.26 -0.04% +3.70% Warsaw 2346.74 2344.56 +0.09% +3.08% Bucharest 7060.92 7060.24 +0.01% -4.37% Ljubljana <.SBITOP 823.49 818.34 +0.63% +2.39% > Zagreb 1751.22 1747.60 +0.21% +0.14% Belgrade <.BELEX1 697.81 697.73 +0.01% -8.39% 5> Sofia 563.68 565.56 -0.33% -5.18% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.7300 -0.0330 +234bps -4bps R> 5-year <CZ5YT=R 1.7580 0.0580 +210bps +4bps R> 10-year <CZ10YT= 1.8040 0.0370 +158bps +1bps RR> Poland 2-year <PL2YT=R 1.3630 0.0080 +198bps +1bps R> 5-year <PL5YT=R 2.1940 0.0260 +254bps +0bps R> 10-year <PL10YT= 2.7840 0.0250 +256bps +0bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.15 2.19 2.20 2.01 <PRIBOR= > Hungary 0.26 0.48 0.69 0.13 Poland 1.72 1.72 1.73 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Radu Marinas in Bucharest; Editing by Mark Potter)

CEE MARKETS-Hungarian bond yields fall, forint tests 4-week low on CPI decline

15 Jan 2019

* Hungarian Dec CPI drops below forecasts, central bank target * Hungarian bond yields hit 8-month low, Polish yields at multi-year lows * Core inflation rise to come under increasing scrutiny -analysts * Bucharest stocks hit new 2-year low on tax worries (Adds forint, leu weakening, new analyst comment) By Sandor Peto BUDAPEST, Jan 15 Hungarian government bond yields fell to their lowest levels in about eight months on Tuesday and the forint weakened after local and Slovak data confirmed that inflation fell more than expected in December across central Europe. The 10-year Bund yield dropped 3 basis points to 0.2 percent, after weak German economic output data. Its Polish peer shed 5 basis points to 2.677 percent, after touching its lowest level since August 2016 at 2.665 percent. Hungary's corresponding yield was fixed at 2.68 percent , down 10 basis points, after December data showed a fall in annual inflation from 3.1 percent in November to 2.7 percent, below analysts' 3 percent forecast in a poll. Neighbouring Slovakia also posted inflation figures below expectations on Tuesday, just as Czech and Polish data released earlier had done. Poland's headline inflation, at 1.1 percent, is well below the middle of the central bank's 1.5-3.5 percent goal. Hungary's figure also came in below the central bank's 3 percent long-term goal. A decline in crude oil prices has helped inflation retreat in the past months, and coupled with weakening expectations for Federal Reserve rate hikes, has led to a slump in government bond yields in central Europe. Hungary's 10-year yield has declined by 124 basis points since a peak in early October. Years of wage rises in the region, however, have started to feed into an increase in core inflation, including the price of services and processed food. Hungary's core inflation could rise above 3 percent this month and could nudge the central bank (NBH) towards tighter policy, ING analyst Peter Virovacz said in a note. Analysts expect the bank to let forint liquidity tighten slowly and allow short-term interbank interest rates to rise gradually. "(But) we still do not expect a hike in the (0.9 percent NBH) base rate this year or interbank interest rates to reach the base rate before 2020," said Orsolya Nyeste, Budapest-based analyst of Erste, in a note. The forint underperformed Central European peers, but stopped short of entering 4-week highs beyond 323 versus the euro. At 1357 GMT it traded at 322.95, weaker by 0.4 percent. The leu touched its weakest level in seven months for the second time within a few days at 4.69 against the euro, to recover to 4.682 later. Bucharests's stocks index also recouped most of its early loss, after falling by about 2 percent to a new 2-year low due to worries over 2019 tax increases on the bank and energy sectors. CEE SNAPSHOT AT MARKETS 1457 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5700 25.5600 -0.04% +0.54% crown > Hungary <EURHUF= 322.9500 321.7100 -0.38% -0.58% forint > Polish <EURPLN= 4.2910 4.2915 +0.01% -0.03% zloty > Romanian <EURRON= 4.6820 4.6812 -0.02% -0.60% leu > Croatian <EURHRK= 7.4300 7.4348 +0.06% -0.27% kuna > Serbian <EURRSD= 118.4000 118.4000 +0.00% -0.08% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1002.49 1001.150 +0.13% +1.61% 0 Budapest 40459.91 40667.65 -0.51% +3.38% Warsaw 2331.93 2327.66 +0.18% +2.43% Bucharest 6876.39 6934.35 -0.84% -6.87% Ljubljana <.SBITOP 818.34 811.10 +0.89% +1.75% > Zagreb 1742.24 1734.34 +0.46% -0.38% Belgrade <.BELEX1 697.73 693.40 +0.62% -8.40% 5> Sofia 565.94 568.05 -0.37% -4.80% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.8900 0.1950 +250bps +21bps R> 5-year <CZ5YT=R 1.6810 -0.0520 +204bps -3bps R> 10-year <CZ10YT= 1.7860 -0.0680 +158bps -4bps RR> Poland 2-year <PL2YT=R 1.3310 -0.0020 +194bps +1bps R> 5-year <PL5YT=R 2.1100 -0.0510 +247bps -3bps R> 10-year <PL10YT= 2.6970 -0.0380 +249bps -1bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.15 2.19 2.20 2.01 <PRIBOR= > Hungary 0.26 0.41 0.61 0.13 Poland 1.73 1.71 1.68 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Radu Marinas in Bucharest; Editing by David Evans/Keith Weir)

CEE MARKETS-Hungarian bond yields hit 8-month low on CPI decline

15 Jan 2019

* Hungarian Dec CPI drops below forecasts, central bank target * Hungarian bond yields hit 8-month low, Polish yields at multi-year lows * Core inflation rise to come under increasing scrutiny -analysts * Bucharest stocks hit new 2-year low on tax worries By Sandor Peto BUDAPEST, Jan 15 Hungarian government bond yields fell further to their lowest levels in about 8 months on Tuesday after local and Slovak data confirmed that inflation fell even more than expected in December across Central Europe. International sentiment was supportive to bonds. Figures in Germany, the region's main export market, showed the weakest annual economic growth in 5 years at 1.5 percent in 2018. The 10-year Bund yield dropped about 3 basis points to almost 0.2 percent, and its Polish peer tracked it, shedding 5 basis points to 2.6705 percent, its lowest level since August 2016. The corresponding Hungarian yield traded at 2.68 percent, down 10 basis points from Monday's fixing, after December data showed a fall in annual inflation from 3.1 percent in November to 2.7 percent, below analysts' 3 percent forecast in a poll. Neighbouring Slovakia also posted inflation figures below expectations on Tuesday, just as Czech and Polish data released earlier showed. Poland's headline inflation, at 1.1 percent, is well below the middle of the central bank's 1.5-3.5 percent goal. Hungary's figure also came in below the central bank's 3 percent long-term goal. A decline in crude prices has helped inflation retreat in the past months, and coupled with weakening expectations for Federal Reserve rate hikes, has led to a slump in government bond yields in Central Europe. Hungary's 10-year yield has declined by 124 basis points since a peak in early October, while corresponding Polish paper shed 65 basis points. Years of wage rises in the region, however, have started to feed into an increase in core inflation, including the price of services and processed food. That trend will be increasingly monitored in Hungary, where core inflation adjusted for the effects of indirect taxes, the central bank's (NBH) closely-watched measure, rose to 2.9 percent in December from 2.7 percent in November, analysts said. "Currently, the headline figure steals the show in the market, but analysts are obviously deep into gauging both headline and core figures," one Budapest-based trader said. ING analyst Peter Virovacz said in a note that core inflation could exceed 3 percent in January and stay above that level in 2019. "All that could encourage the NBH to start a normalisation of monetary policy (tightening) in the foreseeable future," he said. In other markets, Romanian shares continued to plunge, shedding almost 2 percent by 1041 GMT, hitting a new 2-year low. They have been knocked down by worries over 2019 tax increases on the bank and energy sectors. CEE SNAPSHOT AT MARKETS 1141 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5590 25.5600 +0.00% +0.58% crown > Hungary <EURHUF= 321.8500 321.7100 -0.04% -0.24% forint > Polish <EURPLN= 4.2908 4.2915 +0.02% -0.03% zloty > Romanian <EURRON= 4.6835 4.6812 -0.05% -0.63% leu > Croatian <EURHRK= 7.4300 7.4348 +0.06% -0.27% kuna > Serbian <EURRSD= 118.4000 118.4000 +0.00% -0.08% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1002.81 1001.150 +0.17% +1.65% 0 Budapest 40606.96 40667.65 -0.15% +3.75% Warsaw 2332.63 2327.66 +0.21% +2.46% Bucharest 6804.32 6934.35 -1.88% -7.85% Ljubljana <.SBITOP 813.22 811.10 +0.26% +1.11% > Zagreb 1738.97 1734.34 +0.27% -0.56% Belgrade <.BELEX1 696.23 693.40 +0.41% -8.59% 5> Sofia 566.04 568.05 -0.35% -4.78% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.8660 0.1710 +247bps +18bps R> 5-year <CZ5YT=R 1.7040 -0.0290 +206bps -1bps R> 10-year <CZ10YT= 1.8350 -0.0180 +163bps +1bps RR> Poland 2-year <PL2YT=R 1.3090 -0.0240 +191bps -2bps R> 5-year <PL5YT=R 2.1190 -0.0420 +247bps -2bps R> 10-year <PL10YT= 2.6680 -0.0670 +247bps -4bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.15 2.19 2.20 2.01 <PRIBOR= > Hungary 0.26 0.51 0.63 0.13 Poland 1.73 1.71 1.66 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Reporting by Sandor Peto; editing by David Evans)

CEE MARKETS-Tax worry hits Bucharest stocks, Hungarian bond yields fall

14 Jan 2019

* Bucharest stocks fall on worry over new bank tax * Romanian inflation retreats further as expected * Central banks supports leu via deposit tool * Hungarian bond yields resume fall ahead of CPI data (Adds BRD stock fall, Romanian bond and central bank deposit tenders, new comments, Hungarian bond yields fall) By Sandor Peto and Radu-Sorin Marinas BUDAPEST/BUCHAREST, Jan 14 Romanian stocks hit a 2-year low as concerns over 2019 tax increases on the bank and energy sectors have returned. Sentiment in Central Europe turned sour anyway as a surprise fall in China's exports turned the spotlight again on global economic slowdown worries. Bucharest's blue-chip index fell more than 4 percent, below 2-year lows reached last month after the government announced plans for changes in tax and pensions rules. The measures included a tax on bank assets, linked in an unconventional way to interbank rates which are also in the focus of monetary policy. Banca Transilvania fell 9.5 percent and BRD Groupe Societe Generale shed 7.5 percent. "There's a lot of uncertainty in the market on the new banking tax," one Bucharest-based foreign stocks trader said. Investors still do not know details of the base of the tax and whether it would also apply to mandatory reserves, the trader added. Late on Friday, the European Commission also warned Romania, which holds the EU's rotating presidency, over the government's plans to decriminalise some forms of corruption. The leu shrugged off a continuing fall in Romania's annual inflation to 3.3 percent in December from 3.4 percent in November. The drop from levels above 5 percent last year to within the central bank's 1.5-3.5 percent target range increases the chance that the bank will not increase its interest rates further, analysts said. The government sold less 2023-expiry bonds than planned at an auction, with the average yield rising to 4.41 percent from 4.34 percent. But the leu firmed a shade to 4.68 against the euro as the central bank reduced market liquidity through its one-week deposit tool. "The disinflation process in Romania that enabled ROMGBs (Romanian government bonds) to take part in a broader EM rally in recent weeks is set to bottom out," Raiffeisen analysts said in a note. Hungarian bond yields, however, resumed their fall which stalled in the first week of the year. Yields were fixed lower by about 10 basis points along the curve, with the 10-year yield set at 2.78 percent. The market is optimistic that December inflation data due on Tuesday will show a further drop from 3.1 percent in the annual rate in November, one Budapest-based trader said. "The Fed may not increase rates further, the ECB may tighten later and there are global recession fears: global trends support Hungarian bonds," the trader added. CEE SNAPSHOT AT MARKETS 1539 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5690 25.5660 -0.01% +0.54% crown > Hungary <EURHUF= 321.4400 321.4000 -0.01% -0.11% forint > Polish <EURPLN= 4.2900 4.2938 +0.09% -0.01% zloty > Romanian <EURRON= 4.6800 4.6830 +0.06% -0.56% leu > Croatian <EURHRK= 7.4350 7.4312 -0.05% -0.34% kuna > Serbian <EURRSD= 118.3200 118.4300 +0.09% -0.02% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 998.14 1011.440 -1.31% +1.17% 0 Budapest 40549.30 40886.06 -0.82% +3.60% Warsaw 2320.21 2335.10 -0.64% +1.91% Bucharest 6926.41 7240.73 -4.34% -6.19% Ljubljana <.SBITOP 811.66 803.83 +0.97% +0.92% > Zagreb 1735.70 1734.51 +0.07% -0.75% Sofia 567.87 567.46 +0.07% -4.47% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.7910 0.0920 +239bps +10bps R> 5-year <CZ5YT=R 1.7150 -0.0200 +206bps +0bps R> 10-year <CZ10YT= 1.8580 0.0040 +164bps +2bps RR> Poland 2-year <PL2YT=R 1.3480 -0.0190 +195bps -1bps R> 5-year <PL5YT=R 2.1640 -0.0310 +251bps -1bps R> 10-year <PL10YT= 2.7480 -0.0080 +253bps +1bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.14 2.18 2.20 2.01 <PRIBOR= > Hungary 0.24 0.46 0.70 0.13 Poland 1.74 1.73 1.73 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Reporting by Sandor Peto, editing by Ed Osmond)

CEE MARKETS-Bucharest stocks approach 2-year lows on tax worry

14 Jan 2019

* Bucharest stocks fall 2.2 pct before partial recovery * New taxes weigh on the outlook of Romanian stocks * Romanian inflation retreats further as expected By Sandor Peto and Radu-Sorin Marinas BUDAPEST/BUCHAREST, Jan 14 Romanian stocks fell as much as 2.2 percent on Monday, approaching 2-year lows as concerns over 2019 tax increases on the bank and energy sectors have returned. Sentiment in Central Europe turned sour anyway as a surprise fall in China's exports turned the highlight on global economic slowdown concerns again, hitting Asian and European stocks. Bucharest's blue-chip index got within a one-percent distance from its pre-Christmas 2-year lows reached after the government announced plans for changes in tax and pensions rules. The measures included a tax on bank assets, in an unconventional way linked to interbank rates which are also in the focus of monetary policy. Some details of its application remain unclear. The measures are unlikely to keep the budget deficit below the European Union's threshold, 3 percent of economic output, and creating uncertainty in the business environment may make a slowdown in economic growth bigger, analysts said. "Should foreign banks curb lending, as happened in Hungary for instance (in the early 2010s), the adverse impact on the cycle might well offset some of these (government) revenue gains," Morgan Stanley analysts said in a note. Late on Friday, the European Commission also warned Romania, which holds the EU's rotating presidency, over the government's plans to decriminalise some forms of corruption. Bucharest's stock index halved its initial loss to 1.1 percent by 0936 GMT. Budapest's blue-chip index fell at the same rate, retreating from a one-year high reached last week. The drop in Romania was led by an over 2 percent decline in the shares of Banca Transilvania, one of the country's biggest lenders. The leu shrugged off a continuing fall in Romania's annual inflation to 3.3 percent in December from 3.4 percent in November. The drop from levels above 5 percent last year to within the central bank's 1.5-3.5 percent target range increases the chance that the bank will not increase its interest rates further, analysts said. "There are risks on the rise that Romanian rate setters would not resume rate hikes (on the one hand due to banking tax, on the other hand due to ECB postponement risks)," Raiffeisen analyst Stephan Imre said in a note. With the Romanian disinflation process bottoming out, the country's bonds could start to reverse the past weeks' sharp decline in regional bond yields, he said. An auction of 2023-expiry Romanian bonds could still create demand around secondary market bids of 4.37 percent as the bond's tenor is in demand from a broad range of investors, ING analysts said in a note. CEE SNAPSHOT AT MARKETS 1036 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.5600 25.5660 +0.02% +0.58% crown > Hungary <EURHUF= 321.2000 321.4000 +0.06% -0.04% forint > Polish <EURPLN= 4.2948 4.2938 -0.02% -0.12% zloty > Romanian <EURRON= 4.6785 4.6830 +0.10% -0.52% leu > Croatian <EURHRK= 7.4350 7.4312 -0.05% -0.34% kuna > Serbian <EURRSD= 118.3000 118.4300 +0.11% +0.00% dinar > Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1007.42 1011.440 -0.40% +2.11% 0 Budapest 40441.43 40886.06 -1.09% +3.33% Warsaw 2329.24 2335.10 -0.25% +2.31% Bucharest 7162.05 7240.73 -1.09% -3.00% Ljubljana <.SBITOP 808.50 803.83 +0.58% +0.53% > Zagreb 1736.86 1734.51 +0.14% -0.68% Belgrade <.BELEX1 696.20 702.40 -0.88% -8.60% 5> Sofia 568.54 567.46 +0.19% -4.36% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=R 1.7070 0.0090 +230bps +1bps R> 5-year <CZ5YT=R 1.7310 -0.0040 +207bps +1bps R> 10-year <CZ10YT= 1.8370 -0.0170 +162bps +0bps RR> Poland 2-year <PL2YT=R 1.3420 -0.0250 +193bps -2bps R> 5-year <PL5YT=R 2.1700 -0.0250 +250bps -1bps R> 10-year <PL10YT= 2.7460 -0.0100 +253bps +1bps RR> FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.14 2.18 2.20 2.01 <PRIBOR= > Hungary 0.25 0.46 0.68 0.13 Poland 1.73 1.73 1.73 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Reporting by Sandor Peto, editing by Ed Osmond)

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