October 30, 2017 / 10:38 AM / a month ago

CEE MARKETS-Currencies, bonds rebound on dollar, U.S. yields retreat

    * Dollar retreat reduces pressure on CEE currencies
    * Crown zigzags as investors bet for 25 or 50 bp rate hike
    * Romanian repo tender does not end leu liquidity squeeze

    By Sandor Peto and Radu-Sorin Marinas
    BUDAPEST/BUCHAREST, Oct 30 (Reuters) - Some Central European
currencies and government bond prices firmed on Monday as last
week's dollar buying abated and U.S. 10-year government bond
yields gave up some ground.
    The region's currencies were sold for the dollar last week,
also resulting in their weakening against the euro, after the
European Central Bank (ECB) extended its asset buying programme,
even though cut its monthly amount.
    But on Monday the dollar slipped on profit-taking after its
biggest weekly rise this year.
    U.S. 10-year yields also retreated from 7-month highs.
    While strong U.S. economic data and bets that Federal
Reserve Chair Janet Yellen will have a hawkish successor may
continue to buoy the dollar and U.S. yields, their retreat
relieved Central European assets.
    The Polish zloty firmed 0.2 percent to 4.24
against the euro by 0952 GMT, and the Hungarian forint gained
0.1 percent to 310.15.
    Polish government bond yields fell and their curve flattened
slightly, with 10-year papers trading at 3.383 percent, down 4
basis points.
    The crown hovered around Friday's closing levels,
with investors continuing to digest the possible impact of last
week's ECB decisions and comments about the Czech central bank
(CNB) meeting this Thursday.
    In August, the CNB became the first European Central Bank to
lift interest rates since 2012, and on Thursday it is widely
expected to deliver another 25 or 50 basis point hike.
    The weaker the crown is, the bigger a hike can be, while the
ECB's asset buying extension may mean that euro zone interest
rates will remain low longer, keeping the crown attractive even
if Czech rates rise less, market participants said.
    "The CNB will have to be careful not to cause too much
policy diversion with the ECB," said Jakub Cervenka, analysts of
Raiffeisen in a note.  
    The Czech bond yield curve also flattened, with bids rising
9 basis points for the 2-year paper to 0.318 percent and the
10-year yield dropping 7 basis points to 1.612.
    Romania's leu firmed 0.1 percent, after a rare
repo auction by the central bank to provide leu to
commercial banks failed to end the squeeze.
    The central bank injected 4.12 billion lei ($1.04
billion)into the market in the one-week repo tender at its 1.75
percent annual repo rate.
    The 3-month interbank rate was still offered at
1.87 percent, its highest level in 3 years.
    Hungarian government bond yields were steady from Friday's
fixing. Investors watch if the Hungarian central bank's fx swap
tender boosts forint liquidity further and push money
market and debt yields lower, one trader said.
    
               CEE MARKETS  SNAPSH   AT  1052 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.650  25.641  -0.04%   5.29%
                                 0       0          
 Hungary                    310.15  310.47   +0.10  -0.43%
 forint                         00      50       %  
 Polish zloty               4.2400  4.2472   +0.17   3.87%
                                                 %  
 Romanian leu               4.5990  4.6020   +0.07  -1.39%
                                                 %  
 Croatian                   7.5220  7.5135  -0.11%   0.44%
 kuna                                               
 Serbian                    119.15  119.25   +0.08   3.52%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1062.6  1062.2   +0.03   +15.3
                                 5       8       %      0%
 Budapest                   39903.  39667.   +0.60   +24.6
                                97      13       %      9%
 Warsaw                     2514.2  2488.5   +1.04   +29.0
                                 6       0       %      7%
 Bucharest                  7839.2  7857.7  -0.24%   +10.6
                                 4       9              4%
 Ljubljana                  795.82  796.53  -0.09%   +10.9
                                                        0%
 Zagreb                     1889.1  1891.8  -0.15%  -5.30%
                                 2       7          
 Belgrade                   726.51  726.08   +0.06   +1.27
                                                 %       %
 Sofia                      668.04  665.73   +0.35   +13.9
                                                 %      2%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.318   0.089   +108b   +8bps
                                                ps  
   5-year                    0.775   0.015   +112b   +1bps
                                                ps  
   10-year                   1.612   -0.07   +123b   -7bps
                                                ps  
 Poland                                                   
   2-year                    1.586   0.009   +234b   +0bps
                                                ps  
   5-year                    2.619  -0.037   +297b   -4bps
                                                ps  
   10-year                   3.395  -0.001   +301b   +0bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.89    1.08    1.23       0
               IBOR=>                               
 Hungary               <BU    0.08    0.11    0.14    0.03
               BOR=>                                
 Poland                <WI    1.78   1.824    1.94    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 

($1 = 3.9516 lei)

 (Additional reporting by Jason Hovet in Prague; Editing by
Alison Williams)
  
 
 

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