March 27, 2018 / 2:47 PM / a month ago

CEE MARKETS-Forint assets gain, with central bank holding fire

    * Risk appetite returns as U.S.-China trade war fears ease
    * Hungarian central bank holds rates at record lows
    * Romania bucks bonds firming after big Feb budget deficit
    * Polish bond auction draws solid demand

 (Adds Hungarian central bank decisions, CCC stocks rise, Polish
bond auction result, Czech central bank rates poll)
    By Sandor Peto
    BUDAPEST, March 27 (Reuters) - Budapest joined in the gains
for most Central European assets, driven by a global rise in
risk appetite, even though Hungary's central bank (NBH)
reaffirmed its loose monetary policy on Tuesday.
    Reports of behind-the-scene talks between the United States
and China to avert a trade war boosted risk appetite globally.
    For now, investors are shrugging off a planned joint action
by 14 European Union members, including Central Europe's biggest
states, to expel Russian diplomats, in response to the poisoning
of a Russian former double agent in England.
    Warsaw led a rise in equities, with its blue-chip index
 gaining 1.1 percent by 1405 GMT.
    CCC stocks jumped 5.1 percent, after the shoe
retailer said on Monday that it planned to double sales by 2022.
    The zloty gained 0.2 percent against the euro,
leading regional currencies, which have been under pressure in
the past two months from global market jitters and a retreat in
inflation in most of the region.
    Government bond auctions drew solid demand and yields
dropped in Warsaw and Belgrade.
    Hungarian government bond yields dropped by a few basis
points, with their curve flattening.
    Hungary's central bank kept interest rates on hold at its
meeting as expected and reiterated that it wanted to keep
monetary conditions loose.
    The forint firmed mildly, in tandem with other regional
units, to 312.65 against the euro.
    "Expected tightening by the ECB (European Central Bank)
soon, and loose monetary policy by the NBH could weaken the
unit, while fundamentals remain strong," Equilor brokerage said
in a note. 
    It added that the forint was unlikely to ease beyond the
318-320 range.  
    Romania's yield curve also flattened, but long-term yields
did not drop there, and two- and three-year yields rose.
    Romania's central bank is expected to raise rates again next
week after a surge in wages boosted inflation.
    The yield on Romanian two-year government bonds was bid
higher by 14 basis points at 2.73 percent.
    Yields rose after the finance ministry reported late on
Monday a deficit of 0.6 percent of economic output for February,
even though the deterioration in the figures had been expected
.
    The impact was offset by offset by the government meeting
its borrowing target for March despite fluctuations in demand at
its auctions, Raiffeisen analysts Nicolae Covrig said. 
    Czech yields changed little.
    The Czech central bank is likely to hold rates unchanged on
Thursday and keep them flat until a hike in the third quarter as
inflation has slowed, a Reuters poll of analysts showed.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1605 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4650   25.4700    +0.02%  #VALUE!
 crown      >                                       
 Hungary    <EURHUF=  312.6500  312.8100    +0.05%  #VALUE!
 forint     >                                       
 Polish     <EURPLN=    4.2130    4.2215    +0.20%  #VALUE!
 zloty      >                                       
 Romanian   <EURRON=    4.6500    4.6520    +0.04%  #VALUE!
 leu        >                                       
 Croatian   <EURHRK=    7.4400    7.4425    +0.03%  #VALUE!
 kuna       >                                       
 Serbian    <EURRSD=  118.4300  118.6600    +0.19%  #VALUE!
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1116.62  1110.400    +0.56%    +3.57%
                                       0            
 Budapest             37264.59  37087.05    +0.48%    -5.37%
 Warsaw                2266.21   2240.65    +1.14%    -7.92%
 Bucharest             8745.88   8722.84    +0.26%   +12.80%
 Ljubljana  <.SBITOP    826.11    826.98    -0.11%    +2.45%
            >                                       
 Zagreb                1826.92   1817.36    +0.53%    -0.87%
 Belgrade   <.BELEX1    746.82    748.78    -0.26%    -1.71%
            5>                                      
 Sofia                  655.25    653.82    +0.22%    -3.28%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.8330    0.0720   +143bps     +8bps
            R>                                      
   5-year   <CZ5YT=R    1.2780   -0.0250   +136bps     -1bps
            R>                                      
   10-year  <CZ10YT=    1.9210   -0.0030   +141bps     +1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5220   -0.0240   +212bps     -2bps
            R>                                      
   5-year   <PL5YT=R    2.3900   -0.0040   +248bps     +1bps
            R>                                      
   10-year  <PL10YT=    3.2240    0.0000   +271bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.96      1.06      1.23      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.10      0.18      0.03
                                                    
 Poland                   1.72      1.73      1.78      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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