Bonds News

CEE MARKETS-Czech crown, Prague stocks close to two-year highs

    PRAGUE, Jan 14 (Reuters) - The Czech crown gained past a key
level against the euro on Tuesday to touch a 23-month high as
markets priced in rising chances of an interest rate increase
this year. Prague stocks also traded at their highest in nearly
two years.
    Other central European currencies strengthened as well, led
by the  Hungarian forint's 0.5% rise after
stronger-than-expected inflation data showed price growth
hitting a seven-year high of 4.0%.
    "Investors, foreign ones especially, took the rise in
inflation as a clue that the central bank may tighten monetary
conditions," a dealer said, adding tightening by the Hungarian
central bank, viewed as the most dovish in the region, was still
    The Hungarian central bank lowered its own inflation gauge
on Tuesday and has said it was committed to an accommodative,
loose monetary policy.
    Stock markets gave back some of their recent gains won so
far this year on improving global sentiment as the United States
and China moved closer to a trade deal.
    Prague's market climbed to its highest since February
2018 in early Tuesday trade, at 1,141.13 points, It was up 0.2%
by mid-morning.
    The crown retreated by 0955 GMT and was steady at
25.215 to the euro, with a dealer saying the move stronger was
helped by lower liquidity and better sentiment in the region but
that the 25.18 level was showing resistance.
    The Czech National Bank has kept the main two-week repo rate
 unchanged at its last five monetary policy
meetings, balancing domestic inflationary pressures with
uncertainties abroad affecting the export-reliant Czech economy.
    In recent months, Czech markets have priced out chances of a
rate cut in the next year. They now are starting to price in
higher chances of a rate increase this year after inflation came
in above the upper end of the bank's tolerance band around its
2% target the past two months.    
    Central bank Vice-Governor Marek Mora said late on Monday he
saw stable or mildly higher interest rates this year as the most
    "For me, if the indications of a revival abroad remain, and
developments abroad tend towards optimistic, then I could
imagine myself leaning again towards raising interest rates,"
Mora told Czech Television.
    Analysts said the crown's gains might help keep the central
bank's hand steady. "The stronger the crown, the weaker the
chance the central bank will tighten ... That is always the
dilemma for markets," ING economist Jakub Seidler said.

                                CEE MARKETS        SNAPSHOT    AT                        
                                                                 1055 CET                
                                                   Latest      Previous        Daily     Change
                                                   bid         close           change    in 2020
 EURCZK=    Czech crown                            25.2150     25.2200         +0.02%    +0.86%
 EURHUF=    Hungary forint                         332.6000    334.1050        +0.45%    -0.44%
 EURPLN=    Polish zloty                           4.2320      4.2371          +0.12%    +0.58%
 EURRON=    Romanian leu                           4.7790      4.7782          -0.02%    +0.19%
 EURHRK=    Croatian kuna                          7.4435      7.4440          +0.01%    +0.03%
 EURRSD=    Serbian dinar                          117.4500    117.6700        +0.19%    +0.10%
            Note: daily change  calculated from                                1800 CET Latest      Previous        Daily     Change
                                                               close           change    in 2020
 .PX        Prague                                 1139.45     1137.4100       +0.18%    +2.14%
 .BUX       Budapest                               45336.74    45447.52        -0.24%    -1.62%
 .WIG20     Warsaw                                 2182.75     2194.42         -0.53%    +1.52%
 .BETI      Bucharest                              10033.11    10023.95        +0.09%    +0.56%
 .SBITOP    Ljubljana                              979.32      980.08          -0.08%    +5.77%
 .CRBEX     Zagreb                                 2044.45     2043.13         +0.06%    +1.34%
 .BELEX15   Belgrade                               802.25      802.68          -0.05%    +0.07%
 .SOFIX     Sofia                                  577.67      578.16          -0.08%    +1.68%
                                                   Yield       Yield           Spread    Daily
                                                   (bid)       change          vs Bund   change in
            Czech Republic                                                               spread
 CZ2YT=RR   2-year                                 1.7240      0.0080          +230bps   +0bps
 CZ5YT=RR   5-year                                 1.4680      -0.0530         +195bps   -4bps
 CZ10YT=RR  10-year                                1.7130      0.0280          +192bps   +4bps
 PL2YT=RR   2-year                                 1.5170      -0.0560         +210bps   -6bps
 PL5YT=RR   5-year                                 1.9980      -0.0270         +248bps   -2bps
 PL10YT=RR  10-year                                2.3300      -0.0210         +253bps   -1bps
                                FORWARD            RATE        AGREEMENT                 
                                                   3x6         6x9             9x12      3M interbank
            Czech Rep                              2.29        2.31            2.31      2.17
            Hungary                                0.27        0.34            0.43      0.00
            Poland                                 1.74        1.77            1.79      1.71
            Note: FRA quotes    are for ask prices                                       
            ************************************************************** (Reporting by Jason Hovet in Prague, Marton Dunai in Budapest,
Alicja Ptak in Warsaw and Luiza Ilie in Bucharest; editing by
Larry King)