* Czech central bank not expected to remove crown cap
* Czech 2-year bonds trade at 2-week low yields
* Good auction seen in Hungary on loose central bank policy
* Croatian stocks tumble on concerns over food group Agrokor
By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, March 30 (Reuters) - Czech short-term
government debt firmed on Thursday as the country's central bank
(CNB) holds its last meeting before the end of its "hard
commitment" to keep its cap on the crown's value.
The bank has pledged to maintain the cap, which has been
keeping the crown weaker than 27 to the euro since late 2013, at
least until the end of the first quarter.
It is not expected to change its record low interest rates
or to abandon the cap at the meeting. It is due to publish its
decisions at 1200 GMT.
The CNB has tripled its forex reserves since 2013 to defend
the cap and speculative buying of the crown and Czech government
debt, mainly short-term papers, has surged this year.
The yield on 2-year Czech bonds was bid at a 2-week low
-0.58 percent on Thursday, down 9 basis points.
"I am expecting a confirmation of the end of the (central
bank's) firm commitment but a continuation of interventions for
the time being and (a message of) the possibility to stop when
the CNB sees appropriate," one Prague-based fixed income trader
said.
Fundamentals should strengthen the crown, but accumulated
crown buying positions worth tens of billions of euros make it
uncertain how Czech markets will behave after the cap is
removed, probably in April or May, analysts have said.
"We would not regard the exit of the FX regime as the start
of a one-way CZK (crown) appreciation streak, but would rather
expect significant volatility possibly well into Q3 2017," said
Raiffeisen analyst Wofgang Ernst in a note.
The crown's implied euro exchange rate was near multi-month
highs in forwards contracts.
Elsewhere in Central Europe, Zagreb's stock index
fell as much as 4.5 percent in early trade due to a plunge of
the units of unlisted Agrokor, the biggest food producer and
retailer in the Balkans.
The decline followed news that the Croatian government may
propose a law on shielding the economy from troubles involving
big firms and about a possible repayment freeze deal with
Agrokor creditors.
In Hungary, government bond yields dropped further by a few
basis points, with 3-year bonds trading at 1.18 percent, at
2-month lows, as Thursday's bond auction in Budapest is expected
to draw strong demand.
"The Hungarian central bank's dovish stance (after its
meeting on Tuesday) surprised many foreign investors, so this
will be a good auction," one trader said.
The stock of Hungarian oil group MOL fell as much
as 2.5 percent after Czech electricity company CEZ
conditionally sold its 7.5 percent stake in MOL.
CEE SNAPS AT 1052
MARKETS HOT CET
CURRENCIES
Lates Previ Daily Chang
t ous e
bid close chang in
e 2017
Czech crown 27.02 27.02 +0.0 -0.05
00 15 1% %
Hungary 310.0 309.8 -0.04 -0.38
forint 000 750 % %
Polish 4.228 4.221 -0.15 4.16%
zloty 0 8 %
Romanian 4.542 4.554 +0.2 -0.17
leu 8 7 6% %
Croatian 7.453 7.434 -0.25 1.37%
kuna 0 2 %
Serbian 123.8 123.8 +0.0 -0.36
dinar 000 900 7% %
Note: daily calculate previ close 1800
change d from ous at CET
STOCK
S
Lates Previ Daily Chang
t ous e
close chang in
e 2017
Prague 982.6 982.7 -0.01 +6.6
5 1 % 2%
Budapest 31923 32232 -0.96 -0.25
.74 .95 % %
Warsaw 2210. 2214. -0.16 +13.
82 45 % 50%
Bucharest 7975. 7942. +0.4 +12.
91 76 2% 57%
Ljubljana 767.3 777.5 -1.31 +6.9
8 8 % 4%
Zagreb 1952. 2015. -3.12 -2.14
23 12 % %
Belgrade <.BELEX15 734.6 737.4 -0.38 +2.4
> 4 7 % 1%
Sofia 634.5 633.3 +0.1 +8.2
0 4 8% 0%
BONDS
Yield Yield Sprea Daily
d
(bid) chang vs chang
e Bund e in
Czech sprea
Republic d
2-year <CZ2YT=RR -0.57 -0.08 +016 -9bps
> 7 6 bps
5-year <CZ5YT=RR 0.138 -0.00 +052 +1bp
> 6 bps s
10-year <CZ10YT=R 0.97 -0.01 +064 -1bps
R> 8 bps
Poland
2-year <PL2YT=RR 2.042 0.008 +278 +1bp
> bps s
5-year <PL5YT=RR 2.937 -0.02 +331 -1bps
> 3 bps
10-year <PL10YT=R 3.525 -0.01 +319 +0bp
R> bps s
FORWARD RATE AGREEMENT
3x6 6x9 9x12 3M
inter
bank
Czech Rep < 0.28 0.32 0.38 0
PRIBOR=>
Hungary < 0.21 0.27 0.37 0.2
BUBOR=>
Poland < 1.755 1.777 1.819 1.73
WIBOR=>
Note: FRA are for
quotes ask
prices
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************
(Additional reporting by Igor Ilic in Zagreb; Editing by Tom
Heneghan)