* Polish industrial output rises less than forecast, PPI
drops
* Romanian auction draws strong demand despite CEE yield
rise
* Shares of OTP Bank fall, Romania blocks its acquisition
deal
(Recasts, adding bond markets, comments from Polish rate setter
and Budapest-based trader)
By Sandor Peto and Anna Wlodarczak
BUDAPEST/WARSAW, March 19 (Reuters) - Central European
currencies and government bonds fell on Monday amid expectations
the Federal Reserve will raise U.S. interest rates at its
meeting on Wednesday and may hint at more to come.
Stocks also fell, since rising U.S. rates would make assets
in the region's emerging markets relatively less attractive.
Poland's weaker-than-expected data on manufacturing growth
in February and a decline in producer prices underpinned that
Poland's own interest rates are likely to remain at record lows
this year.
The figures had only a passing impact on the zloty. The
Polish central bank had already lowered its inflation forecasts
two weeks ago, and its Governor Adam Glapinski said there was no
reason for rates to rise until the end of 2020.
The zloty traded at 4.2166 against the euro at
1343 GMT, weaker by less than 0.1 percent, off a 3-month high
set in morning trade.
However, a member of the Polish central bank's Monetary
Policy Council, Jerzy Osiatynski, warned later that inflation
may turn out higher than the bank's new forecasts.
Andrzej Kaminski, economist at Millennium Bank, took the
same view. "Due to rising labor costs, the MPC will raise the
cost of money in the second half of 2019, as wages and inflation
will be growing faster than assumed in the (central bank's)
projection," he said.
The forint, the Czech crown and the
Romanian leu also weakened. The crown and the leu
traded near two-month lows even though the Czech and Romanian
central banks have already started to raise rates.
The latter is expected to raise rates again on April 6, but
government bond auctions have mostly drawn healthy demand in the
past weeks after an earlier surge in yields.
On Monday it sold more six-year bonds than planned, at lower
yield than at the previous auction on Feb. 12.
Elsewhere in the region, government bond yields mostly rose
by a few basis points, tracking U.S. and euro zone peers.
"Markets are a bit clueless," one Budapest-based trader
said. "Much will depend on the (pace of) Fed rate hikes, and the
ECB's later decisions."
"In Hungary, bonds could remain relatively well supported by
the central bank's measures (to stimulate demand)," the trader
added.
Stocks mostly fell in the region, tracking a global decline
ahead of the expected Fed rate hike.
Budapest led the retreat, shedding 2.5 percent.
The stocks of the region's biggest independent bank, OTP
fell more than 3 percent from a one-month high set in
the previous session, after Romania's central bank torpedoed
OTP's takeover of Banca Romaneasca.
CEE SNAPSHOT AT
MARKETS 1530 CET
CURRENCI
ES
Latest Previous Daily Change
bid close change in 2018
Czech <EURCZK= 25.4240 25.4200 -0.02% +0.46%
crown >
Hungary <EURHUF= 310.8800 310.7200 -0.05% +0.01%
forint >
Polish <EURPLN= 4.2166 4.2145 -0.05% -0.95%
zloty >
Romanian <EURRON= 4.6670 4.6650 -0.04% +0.27%
leu >
Croatian <EURHRK= 7.4335 7.4325 -0.01% -0.04%
kuna >
Serbian <EURRSD= 118.1500 118.4100 +0.22% +0.30%
dinar >
Note: calculated from 1800 CET
daily
change
Latest Previous Daily Change
close change in 2018
Prague 1118.66 1118.520 +0.01% +3.76%
0
Budapest 37805.57 38891.24 -2.79% -3.99%
Warsaw 2271.31 2285.08 -0.60% -7.72%
Bucharest 8807.12 8816.96 -0.11% +13.59%
Ljubljana <.SBITOP 825.29 823.14 +0.26% +2.35%
>
Zagreb 1845.10 1843.11 +0.11% +0.12%
Belgrade <.BELEX1 748.51 748.78 -0.04% -1.49%
5>
Sofia 670.95 679.98 -1.33% -0.96%
BONDS
Yield Yield Spread Daily
(bid) change vs Bund change
in
Czech spread
Republic
2-year <CZ2YT=R 0.8420 0.0470 +142bps +4bps
R>
5-year <CZ5YT=R 1.3380 0.0670 +136bps +5bps
R>
10-year <CZ10YT= 1.9640 0.0350 +137bps +1bps
RR>
Poland
2-year <PL2YT=R 1.5210 0.0000 +209bps -1bps
R>
5-year <PL5YT=R 2.4270 0.0120 +245bps -1bps
R>
10-year <PL10YT= 3.2700 0.0190 +268bps +0bps
RR>
FORWARD RATE AGREEMEN
T
3x6 6x9 9x12 3M
interban
k
Czech Rep 0.96 1.07 1.22 0.90
<PRIBOR=
>
Hungary 0.07 0.11 0.19 0.03
Poland 1.72 1.73 1.76 1.70
Note: FRA are for ask prices
quotes