March 29, 2018 / 9:06 AM / 6 months ago

CEE MARKETS-Crown firms, market awaits central bank comments

    * Crown firms, Czech central bank comments in focus
    * Prospect of more CNB rate hikes seen supporting crown
    * Hungarian bond auction seen drawing demand, yields steady

    By Sandor Peto
    BUDAPEST, March 29 (Reuters) - The crown firmed slightly,
bucking a trend of easing of Central European currencies, amid
positioning ahead of the Czech central bank's (CNB) meeting
later on Thursday.
    The CNB, which has raised interest rates three times since
August last year, is expected to keep them on hold on Thursday
in its decision due at 1100 GMT.
    Comments from CNB Governor Jiri Rusnok starting from 1215
GMT will be closely watched as a retreat in inflation rates in
most of the region in February has triggered some expectations
for a shift towards a less hawkish rhetoric.
    Expectations for further monetary tightening, along with the
region's robust wage and output growth, have been a key factor
to buoy the crown. 
    Foreign investors poured funds worth tens of billions of
euros into crown assets before the CNB removed a cap on the
currency a year ago, letting it firm beyond 27 against the euro.
    The Czech currency traded at 25.435 to the euro at
0824 GMT, less than 0.1 percent firmer, while the forint
, the zloty and the leu eased
slightly.
    The currency has been hovering around 25.435 since the
publication of February inflation figures in the region. 
    The proportion of foreigners' holding Czech state domestic
bonds was almost steady at 37.72 percent in February according
to fresh figures, which showed they do not rush to close their
positions.
    "We estimate two more (interest rate) hikes this year due to
insufficient strengthening of the Czech koruna (crown),"
Raiffeisen analyst Milan Frydrych said in a note, adding though
that he did not expect the CNB to change its stance at the
meeting. 
    Czech government bonds mostly moved sideways.
    Hungarian bonds also took a breath after firming in the past
two days which left their yield curve flatter.
    The government bi-weekly government bond auctions, however,
are expected to draw solid demand.
    "The shorter maturities on offer are likely to get absorbed
by bank books, while the long one, the 2039/A is rare on offer,
and investors like pension funds will queue up for it," one
Budapest-based fixed income trader said.
    Hungary's and Poland's 10-year government bond yields are
expected to rise by 40-50 basis points in the next 12 months,
tracking Bunds and U.S. yields, a Reuters poll of 17 analysts
showed on Thursday.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1024 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4350   25.4510    +0.06%    +0.42%
 crown      >                                       
 Hungary    <EURHUF=  312.5000  312.2700    -0.07%    -0.51%
 forint     >                                       
 Polish     <EURPLN=    4.2058    4.2035    -0.05%    -0.70%
 zloty      >                                       
 Romanian   <EURRON=    4.6570    4.6525    -0.10%    +0.49%
 leu        >                                       
 Croatian   <EURHRK=    7.4300    7.4425    +0.17%    +0.00%
 kuna       >                                       
 Serbian    <EURRSD=  118.4000  118.5600    +0.14%    +0.08%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1122.77  1119.050    +0.33%    +4.14%
                                       0            
 Budapest             37178.34  36783.31    +1.07%    -5.58%
 Warsaw                2216.26   2203.70    +0.57%    -9.95%
 Bucharest             8716.95   8726.88    -0.11%   +12.42%
 Ljubljana  <.SBITOP    822.19    821.53    +0.08%    +1.96%
            >                                       
 Zagreb                1811.08   1813.98    -0.16%    -1.73%
 Belgrade   <.BELEX1    745.39    746.10    -0.10%    -1.90%
            5>                                      
 Sofia                  653.64    654.09    -0.07%    -3.51%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.8210    0.0960   +141bps    +10bps
            R>                                      
   5-year   <CZ5YT=R    1.2880    0.0020   +138bps     +0bps
            R>                                      
   10-year  <CZ10YT=    1.9030   -0.0040   +140bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5090   -0.0100   +210bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.3790   -0.0080   +248bps     -1bps
            R>                                      
   10-year  <PL10YT=    3.2260    0.0070   +273bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.98      1.08      1.23      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.10      0.18      0.03
                                                    
 Poland                   1.73      1.74      1.77      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto
Editing by Edmund Blair)
  
 
 
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