December 20, 2018 / 3:42 PM / 9 months ago

CEE MARKETS-Czech yield curve steepens, central bank says no rush to hike

    * Czech central bank holds fire, says no rush to hike
    * Fed comments disappoint some investors, stocks fall 
    * Romanian shares extend plunge on tax plans

 (Recasts with Czech central bank decision and comments and
Romanian government's win in no confidence vote)
    By Sandor Peto and Alicja Ptak
    BUDAPEST/WARSAW, Dec 20 (Reuters) - The Czech government
yield curve steepened and the crown eased slightly on Thursday
as the central bank took a pause in its rate hikes and said
there was no need to rush with tightening.
    Central Europe's most hawkish central bank kept its
benchmark rate on hold at 1.75 percent, as
expected, after four consecutive hikes.
    Governor Jiri Rusnok said volatile food prices had pushed
inflation lower, and the majority of board members preferred to
wait for more economic data and forecasts, seeing no need to
rush through another rate hike.
    The crown eased 0.1 percent to 25.79 against the
euro by 1456 GMT.
    The forint, meanwhile, firmed 0.3 percent despite
third-quarter data showing a fall in Hungary's current account
surplus, after the country's central bank forecast a rise in
core inflation, underpinning its shift to more hawkish rhetoric.

    The Czech government bond yield curve steepened, with the
2-year mid-yield dropping 4 basis points to 1.5 percent, while
the 10-year yield edged up 3 basis points to 1.98 percent.
    Hungarian and Polish long-term yields tracked a drop in U.S.
and German yields after the Federal Reserve took a slightly more
dovish tone on Wednesday then at its previous meetings, but
stuck by its plan to withdraw stimulus to the economy.

    The dollar, whose strength caused selling in emerging
markets earlier this year, weakened, but the Fed caused
disappointment among investors who had expected less hawkish
comments, triggering a sell-off in equities markets.
    In Central Europe, Warsaw's bluechip index shed 1.8
percent, partly due to a fall in energy sector stocks such as
PGE and Tauron.
    "Energy companies are falling on the news that they will
have to contribute to the energy price hikes, it could be
somewhere between 1 or 2 billions zlotys in 2019," said
Krzysztof Kubiszewski, analyst at Trigon Dom Maklerski.    
     Bucharest's blue chip index fell 1.7 percent.
     On Wednesday, the index posted its second-biggest loss for
at least two decades, shedding more than 12 percent after the
government announced shock plans to tax banking assets and cap
gas prices.
     The Social Democrat-led government survived a no confidence
vote on Thursday as expected, days before taking over the
European Union's rotating presidency.
    "A big question mark remains the implementation of the
fiscal measures recently disclosed by government which will have
a strong negative impact on the business environment," Erste
analyst Eugen Sinca said.
    Labour Minister Marius Budai was quoted as saying by state
news agency Agerpres earlier on Thursday that the government
could approve the measures later in the day.
            CEE       SNAPSHOT   AT                         
            MARKETS             1556 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7900   25.7600    -0.12%    -0.96%
 crown      >                                       
 Hungary    <EURHUF=  321.6000  322.5200    +0.29%    -3.32%
 forint     >                                       
 Polish     <EURPLN=    4.2850    4.2830    -0.05%    -2.54%
 zloty      >                                       
 Romanian   <EURRON=    4.6520    4.6621    +0.22%    +0.60%
 leu        >                                       
 Croatian   <EURHRK=    7.4280    7.4205    -0.10%    +0.03%
 kuna       >                                       
 Serbian    <EURRSD=  118.3000  118.2700    -0.03%    +0.17%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                 990.89  1008.110    -1.71%    -8.09%
 Budapest             39430.74  39966.19    -1.34%    +0.14%
 Warsaw                2300.91   2342.81    -1.79%    -6.51%
 Bucharest             7351.75   7475.22    -1.65%    -5.18%
 Ljubljana  <.SBITOP    790.91    791.71    -0.10%    -1.92%
 Zagreb                1727.80   1740.96    -0.76%    -6.24%
 Belgrade   <.BELEX1    750.98    762.05    -1.45%    -1.16%
 Sofia                  589.28    589.65    -0.06%   -13.01%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.6110   -0.0660   +221bps     -7bps
   5-year   <CZ5YT=R    1.8270    0.0180   +209bps     +2bps
   10-year  <CZ10YT=    2.0460    0.0480   +182bps     +6bps
   2-year   <PL2YT=R    1.3550   -0.0630   +195bps     -6bps
   5-year   <PL5YT=R    2.3340    0.0130   +260bps     +1bps
   10-year  <PL10YT=    2.8870   -0.0140   +266bps     +0bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.17      2.24      2.30      2.02
 Hungary                  0.30      0.53      0.77      0.13
 Poland                   1.75      1.76      1.78      1.72
 Note: FRA  are for ask prices                              

 (Reporting by Sandor Peto;
Editing by Alison Williams)
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