May 15, 2018 / 10:04 AM / 7 days ago

CEE MARKETS-Forint markets lead fall, U.S. yield rise renews sell-off

    * Dollar, U.S. yields rise renews asset selling in CEE
    * Forint hits 22-month low, CEE bond yields rise
    * Loose monetary policy does not support forint-dealers
    * Budapest leads fall of equity indices  

    By Sandor Peto
    BUDAPEST, May 15 (Reuters) - The forint hit a 22-month low
against the euro on Tuesday as a rebound of the dollar and U.S.
debt yields caused a renewed sell-off in Central European
markets, even as first-quarter data confirmed strong economic
growth in the region.
    Sentiment in emerging markets was also soured by a plunge of
the Turkish lira after President Tayyip Erdogan said he wanted
to take tighter control of monetary policy.
    With debt yields in core markets rising and the dollar
renewing its rally in global markets after a 3-day pause, the
forint proved the most vulnerable currency in Central
Europe.
    It traded at 317.28 versus the euro at 0907 GMT, off a
22-month low of 317.36, but weaker by 0.6 percent from Monday,
while the zloty shed 0.4 percent, to trade at 4.282.
    The forint got little help from figures that showed
faster-than-expected 4.4 percent first-quarter growth in the
Hungarian economy.
    Breaking through a technical support level at 315.5, it was
heading towards the next support at 318, Erste analysts said in
a note. 
    Hungary's 10-year government bond yield rose 2 basis points
to 2.93 percent, tracking a rise in the corresponding U.S.
Treasury yield above 3 percent.
    That was a smaller increase than a 5-basis-point rise in
Poland's 10-year yield to 3.27 percent on Tuesday, but the
Hungarian yield has risen by about 30 basis points this month,
the biggest rise in the region, due to the international rise in
debt yields.
    "Why Hungarian markets are getting the biggest beating, it
is hard to say," one Budapest-based currency dealer said.
    "This may be happening because interest rates are low and
the National Bank (of Hungary) looks unwilling to change them,"
the dealer added.
    Despite the noise in global markets, the Hungarian central
bank is unlikely to give up its ultra-loose policy, and may even
deploy new policy tools to keep long-term interest rates lower,
Erste analyst Gergely Urmossy said in a separate note.
    Poland's central bank is also expected to reiterate after
its meeting on Wednesday that it could keep rates on hold for
years.
    The region's equity indices mostly fell, led by a 1.6
percent decline in Budapest and a 2.9 percent fall in OTP
Bank's stocks which has been jittery around a key
technical level at 11,0000 forints ($414.45) in the past two
weeks.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1107 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.5400   25.4970    -0.17%    +0.01%
 crown      >                                       
 Hungary    <EURHUF=  317.2800  315.5000    -0.56%    -2.01%
 forint     >                                       
 Polish     <EURPLN=    4.2820    4.2667    -0.36%    -2.47%
 zloty      >                                       
 Romanian   <EURRON=    4.6300    4.6260    -0.09%    +1.07%
 leu        >                                       
 Croatian   <EURHRK=    7.3850    7.3820    -0.04%    +0.61%
 kuna       >                                       
 Serbian    <EURRSD=  118.1000  118.1500    +0.04%    +0.34%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1107.59  1104.330    +0.30%    +2.73%
                                       0            
 Budapest             37992.39  38602.89    -1.58%    -3.52%
 Warsaw                2298.31   2321.09    -0.98%    -6.62%
 Bucharest             8664.14   8755.58    -1.04%   +11.74%
 Ljubljana  <.SBITOP    891.23    888.49    +0.31%   +10.52%
            >                                       
 Zagreb                1847.46   1843.09    +0.24%    +0.25%
 Belgrade   <.BELEX1    735.59    737.44    -0.25%    -3.19%
            5>                                      
 Sofia                  645.47    644.24    +0.19%    -4.72%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.8090   -0.0770   +135bps     -8bps
            R>                                      
   5-year   <CZ5YT=R    1.3320    0.0200   +134bps     +2bps
            R>                                      
   10-year  <CZ10YT=    1.8740    0.0130   +125bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6050    0.0410   +215bps     +4bps
            R>                                      
   5-year   <PL5YT=R    2.5350    0.0410   +254bps     +4bps
            R>                                      
   10-year  <PL10YT=    3.2750    0.0410   +265bps     +3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.99      1.14      1.27      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.19      0.29      0.06
                                                    
 Poland                   1.75      1.76      1.81      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 ($1 = 265.4100 forints)

 (Reporting by Sandor Peto
Editing by Andrew Heavens)
  
 
 
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