June 5, 2018 / 9:59 AM / 5 months ago

CEE MARKETS-Czech crown leads gains as central bank chief flags rate hike

    * Main CEE currencies gain as global mood remains calmer
    * Cbank divergence ignored, Polish policy seen staying loose
    * Government bonds, stocks mixed

 (Adds zloty retreat)
    By Sandor Peto and Marcin Goclowski
    BUDAPEST/WARSAW, June 5 (Reuters) - The crown rose
on Tuesday after the governor of the Czech central bank (CNB)
said rates may rise sooner than expected, while Central Europe's
other currencies also mostly firmed as fears about Italy's
future in the euro zone receded.
    But the Polish zloty, after initially leading the
rise, gave up all its gains as the dollar resumed its firming,
hitting a three-month high against the euro.
    CNB Governor Jiri Rusnok said the bank may act because of
faster wage growth and a weaker-than-expected crown.
 
    Regional assets took a hit in May due to advances in the
dollar and U.S. rates, and concerns over political uncertainty
in Italy and Spain.
    "Nerves over both countries have calmed down, the Italian
10-year bond yield is sharply down... there is no bad news," one
Budapest-based fixed income trader said.
    Hungary's 10-year bond yield was fixed at 3.04 percent
, down 6 basis points from Monday.
    Hungarian bond yields have dropped by about 10 basis points
since Italy formed a new government on Friday, with the curve
flattening.
    "People are afraid to sell. Those who bought papers when
yields were rising (last month), keep their positions so as to
come out with gains," the trader said.
    In Romania, which has the highest inflation in the region,
bids for bond yields continued to tick up after the central bank
cut liquidity in markets via a rare deposit auction on Monday. 
    Regional markets have largely ignored a divergence in
monetary policy among the region's main economies during the
selling of recent weeks and then the recovery of the past few
days.
    The Czech and Romanian central banks have started to
increase interest rates, but Hungary and Poland have signalled
no change in their record-low rates for years, and the Polish
central bank is expected to reaffirm that stance on Wednesday.
    The zloty traded steady at 4.2875 versus the euro
at 1300 GMT, off a three-week high set in early trade.
    As the most liquid currency in the region, it was hit hard
in May's sell-off.
    The forint, which took an even bigger beating,
firmed 0.1 percent to 318.6 against the euro.
    It was still near a seven-week low against the Polish
currency. Their cross has been stuck in a range in
the past three months, showing that the two units reacted
similarly to changes in the global sentiment.  
    The crown nudged up 0.3 percent against the euro, 
to 26.655, near a three-week high reached early in the session,.
    All three currencies were off multi-month lows reached last
week.
    The Romanian leu, trading firmer by 0.1 percent,
was off a one-month low set last week.    
    Regional stock markets were mixed after the past days'
rebound from multi-month lows, with Bucharest gaining
1.9 percent and Budapest shedding 1.1 percent.
    
               CEE MARKETS  SNAPSH   AT  1500 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2018
 Czech crown                25.655  25.728   +0.28  -0.50%
                                 0       0       %  
 Hungary                    318.60  318.90   +0.10  -2.53%
 forint                         00      50       %  
 Polish zloty               4.2875  4.2875   +0.00  -2.61%
                                                 %  
 Romanian leu               4.6520  4.6572   +0.11   0.54%
                                                 %  
 Croatian                   7.3840  7.3813  -0.04%   0.60%
 kuna                                               
 Serbian                    117.94  118.07   +0.11   0.39%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2018
 Prague                     1073.7  1080.0  -0.58%  -0.41%
                                 0       0          
 Budapest                   36769.  37194.  -1.14%  -6.62%
                                48      37          
 Warsaw                     2241.7  2210.1   +1.43  -8.92%
                                 6       0       %  
 Bucharest                  8244.3  8093.2   +1.87   +6.33
                                 2       5       %       %
 Ljubljana                  900.90  893.69   +0.81   +11.7
                                                 %      2%
 Zagreb                     1848.7  1838.8   +0.54   +0.32
                                 1       4       %       %
 Belgrade                   746.20  745.01   +0.16  -1.79%
                                                 %  
 Sofia                      636.46  638.33  -0.29%  -6.05%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.949   0.095   +161b   +11bp
                                                ps       s
   5-year                    1.437   0.026   +169b   +7bps
                                                ps  
   10-year                   1.976   0.019   +160b   +7bps
                                                ps  
 Poland                                                   
   2-year                    1.591  -0.001   +225b   +2bps
                                                ps  
   5-year                    2.392   -0.01   +264b   +3bps
                                                ps  
   10-year                   3.227   0.028   +286b   +8bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    1.14    1.29     1.4       0
               IBOR=>                               
 Hungary               <BU    0.19    0.25    0.34    0.12
               BOR=>                                
 Poland                <WI    1.74   1.755     1.8     1.7
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Reporting by Sandor Peto
Editing by Gareth Jones)
  
 
 
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