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CEE MARKETS-Hungarian bond yields hit record low on central bank easing
September 20, 2017 / 10:30 AM / 3 months ago

CEE MARKETS-Hungarian bond yields hit record low on central bank easing

    * Hungarian bonds up to 10 years trade at record-low yields
    * Hungarian central bank eased policy contrary to global
trend
    * CEE assets are mostly rangebound, investors watch Fed
meeting

    By Sandor Peto
    BUDAPEST, Sept 20 (Reuters) - Hungarian bonds traded at
record-low yields and the forint slipped on Wednesday, a day
after Hungary's central bank (NBH) eased policy, including
cutting its overnight deposit rate deeper into negative
territory.
    The bank cut its inflation forecasts and announced other
measures to boost liquidity and push long-term forint interest
rates lower, bucking a trend among the world's big central banks
towards cutting back monetary stimulus.
    Last month, the Czech central bank started to reverse many
years of rate cuts after inflation exceeded its target, which is
the lowest in Central Europe at 2 percent. 
    The Hungarian government bond yield curve became flatter.
Yields traded at record lows on maturities of up to 10 years,
with the 10-year yield dropping 7 basis points to 2.72 percent.
    The forint eased 0.1 percent to 308.40 against the
euro by 0953 GMT, moving closer to 2-1/2-month lows touched near
310 early this week.
    The easing measures had been well flagged, triggering a
slide in the forint in recent weeks from 28-month highs set last
month beyond 302.
    Profit-taking triggered a rebound after the NBH meeting and
the direction is uncertain as investors watch how the measures
unfold.
    The forint could resume its slide, KBC analysts said in a
note, projecting a weakening to 313 by the last quarter of 2017.
    With the measures, the bank's three-month deposit facility
has lost much of its importance and its fx swap tenders, which
provide banks with forint liquidity, are coming into focus.
    "The next tender is on Monday, and the tenors and the prices
 will be closely watched," one Budapest-based dealer said.
    Short-term money market rates may drop into the negative
from near zero, and the three-month interbank BUBOR rate decline
to 6-8 basis points from 12 basis points, the dealer added.     
    Assets in other Central European financial markets were
mostly rangebound as investors await guidance from a meeting of
the U.S. Federal Reserve, due after European markets close.
    "If the (Fed's) rhetoric becomes more hawkish ... this may
push the zloty towards 4.30 per euro," Bank Zachodni WBK said in
a note.
    The zloty traded at 4.2765, firmer by 0.1 percent.
    In equities markets, the stocks of OMV Petrom
fell 3 percent in Bucharest after investment fund Fondul
Proprietatea said that it would sell 1.45 billion shares
in the oil and gas group.        
    
               CEE MARKETS  SNAPSH   AT  1153 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                26.118  26.110  -0.03%   3.40%
                                 0       0          
 Hungary                    308.40  308.17  -0.07%   0.14%
 forint                         00      50          
 Polish zloty               4.2769  4.2799   +0.07   2.97%
                                                 %  
 Romanian leu               4.5985  4.6012   +0.06  -1.38%
                                                 %  
 Croatian                   7.4815  7.4755  -0.08%   0.98%
 kuna                                               
 Serbian                    118.67  118.95   +0.24   3.94%
 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                     1046.1  1047.5  -0.13%   +13.5
                                 6       1              1%
 Budapest                   38133.  38176.  -0.11%   +19.1
                                99      08              6%
 Warsaw                     2492.1  2502.8  -0.43%   +27.9
                                 7       1              4%
 Bucharest                  7928.1  7977.0  -0.61%   +11.9
                                 8       3              0%
 Ljubljana                  806.93  806.60   +0.04   +12.4
                                                 %      5%
 Zagreb                     1823.2  1825.2  -0.11%  -8.60%
                                 3       8          
 Belgrade                   729.78  728.86   +0.13   +1.73
                                                 %       %
 Sofia                      677.10  670.33   +1.01   +15.4
                                                 %      6%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.077   0.302   +076b   +30bp
                                                ps       s
   5-year                    0.069       0   +035b   +2bps
                                                ps  
   10-year                   1.074       0   +064b   +2bps
                                                ps  
 Poland                                                   
   2-year                    1.786    0.02   +247b   +2bps
                                                ps  
   5-year                    2.704  -0.001   +299b   +1bps
                                                ps  
   10-year                   3.347  -0.014   +291b   +0bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.69    0.84    0.94       0
               IBOR=>                               
 Hungary               <BU    0.03    0.09    0.07    0.06
               BOR=>                                
 Poland                <WI    1.77     1.8    1.84    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 

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