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CEE MARKETS-Romanian yields set multi-year highs after inflation jump
November 10, 2017 / 3:11 PM / 10 days ago

CEE MARKETS-Romanian yields set multi-year highs after inflation jump

    * Romania's inflation surges to 2.6 pct, leu at new 5-yr low
    * Romanian government bond yields highest since 2014
    * CEE GDP data due Tuesday seen showing robust growth

 (Recasts with surge in Romanian bond yields, renewed leu
weakening)
    By Sandor Peto and Luiza Ilie
    BUDAPEST/BUCHAREST, Nov 10 (Reuters) - Romanian government
bond yields rose to their highest levels in more than three
years on Friday after data showed Romanian inflation rose faster
in October than analysts had expected.
    Adding to signs of overheating in the Romanian economy, the
country's inflation has been rapidly catching up with a rebound
across Central Europe since mid-2016.
    Annual inflation ran at 2.6 percent in October, compared
with 1.8 percent in September and 1.2 percent in August, fueling
expectations the central bank will have to tighten policy.

    Romanian assets stood out in otherwise subdued CEE markets
ahead of GDP data next week from the region's biggest economies.
    The yield on Romania's 10-year bonds rose 5 basis points to
4.48 percent, according to Reuters data. 
    The leu initially rebounded from five-year lows
after the data. But some investors later decided to cover euro
selling positions ahead of the weekend, one Bucharest-based
dealer said, knocking the leu to its weakest level in more than
five years.
    At 1353 GMT, it traded at 4.655 against the euro, down by a
quarter of a percent. 
    It plunged through 4.6 earlier this week, after the Romanian
central bank said that in future it would focus on keeping
interest rates near its benchmark rate and be more flexible over
the exchange rate.
    That policy will face a test later this year when government
spending is expected to surge, increasing inflation pressures.
    Some investors believe that the leu has reached the bottom,
others see further weakening. 
    "After this week's steep falls it may only edge down," one
Bucharest dealer said.
    Governor Mugur Isarescu said that the leu's weakness
reflected a widening of the trade deficit, but the currency was
"relatively close" to its equilibrium levels.
    Focus is turning to next Tuesday when the region's biggest
economies are due to release third-quarter economic output
figures, which are expected to show continuing robust growth.
Romania's data could highlight overheating pressure in its
economy. 
    Hungary's figures are unlikely to deter its central bank
from its dovish policy. It is widely expected to announce new
easing measures at its Nov. 21 meeting to push long-term yields
down.
    Hungary's debt yield curve is already below U.S. Treasuries
levels up to the 10-year maturity.
    Hungarian yields edged up slightly on Friday, tracking yield
gains across Europe amid a sell-off in German Bunds. 

    
               CEE MARKETS  SNAPSH   AT  1453 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.551  25.542  -0.03%   5.70%
                                 0       5          
 Hungary                    312.06  311.66  -0.13%  -1.04%
 forint                         00      00          
 Polish zloty               4.2296  4.2324   +0.07   4.12%
                                                 %  
 Romanian leu               4.6550  4.6445  -0.23%  -2.58%
 Croatian                   7.5450  7.5375  -0.10%   0.13%
 kuna                                               
 Serbian                    118.43  118.67   +0.20   4.15%
 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                     1066.5  1060.5   +0.57   +15.7
                                 9       3       %      3%
 Budapest                   39864.  40273.  -1.02%   +24.5
                                21      66              6%
 Warsaw                     2473.4  2478.2  -0.19%   +26.9
                                 8       1              8%
 Bucharest                  7764.5  7746.9   +0.23   +9.59
                                 3       9       %       %
 Ljubljana                  792.00  788.58   +0.43   +10.3
                                                 %      7%
 Zagreb                     1859.5  1848.4   +0.60  -6.78%
                                 8       7       %  
 Belgrade                   738.64  734.99   +0.50   +2.96
                                                 %       %
 Sofia                      670.88  671.73  -0.13%   +14.4
                                                        0%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.461   0.125   +121b   +12bp
                                                ps       s
   5-year                     0.73   -0.01   +107b   -1bps
                                                ps  
   10-year                   1.674   0.075   +128b   +6bps
                                                ps  
 Poland                                                   
   2-year                    1.599  -0.006   +235b   -1bps
                                                ps  
   5-year                    2.598   -0.04   +294b   -4bps
                                                ps  
   10-year                    3.41  -0.008   +301b   -2bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.97       1    1.22       0
               IBOR=>                               
 Hungary               <BU    0.09    0.09    0.14    0.03
               BOR=>                                
 Poland                <WI   1.775  1.8075    1.89    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
    

 (Additional reporting by Radu Marinas in Bucharest; editing by
Emelia Sithole-Matarise)
  
 
 

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