May 10, 2018 / 2:46 PM / 4 months ago

CEE MARKETS-Currencies jump on dollar retreat, Hungary's auction well-bid

    * Currencies jump as dollar retreats 
    * Hungary again sells bonds worth more than HUF 100 bln 
    * Modest U.S. inflation rise improves mood in CEE markets
    * Serbian cbank seen keeps rates on hold as expected

 (Recasts with Hungary's auction, surge of currencies and
stocks, U.S. data)
    By Sandor Peto and Robert Muller
    BUDAPEST/PRAGUE, May 10 (Reuters) - Poland led a rebound of
Central European assets on Thursday, reversing the past two
weeks' sell-off as the dollar retreated from this year's peak
against the euro.
    The greenback extended its early losses after April U.S.
data showed a smaller-than-expected rise in the annual inflation
rate.
    The zloty and the forint, Central
Europe's most liquid currencies, had taken the biggest hit from
the dollar's recent surge and their relief was also the biggest
on Thursday. They firmed 0.4 percent versus the euro by 1326
GMT.
    The U.S. figures are seen keeping the Federal Reserve's rate
tightening gradual rather than boosting the attractiveness of
U.S. debt relative to Central European assets.
    Sentiment in regional markets was positive already before
the data because the yield of U.S. 10-year bonds did not rise
above the key 3 percent line at an auction on Wednesday.
    Hungary sold bond worth more than 100 billion forints for
the third successive bi-weekly auction.
    The yields were higher than two weeks ago but the usual
post-auction selling did not occur. 
    "Offers are below the auction yields, but buyers do not come
at those levels... If nothing goes wrong in core markets, bonds
can firm slightly next week," one Budapest-based fixed income
trader said.
    Hungarian yields are supported by a strong primary supply,
with the government frontloading its 2018 issuance, as a
pre-financing of European Union-sponsored projects boosted the
budget deficit in the first months of the year.
    Poland's government bond yields dropped by 2-4 basis points
along the curve, drifting off 6-to 8-week highs.
    Warsaw's bluechip stock index rose by 0.6 percent,
about in line with Budapest and Prague, led by a
5.6 percent jump in the shares of power producer PGE.
    PGE firmed on a Reuters report that it had abandoned its
leading role in plans to build Poland's first nuclear power
station as it focuses on new wind farms in the Baltic Sea.
    Oil group PKN shed more than 3 percent, limiting
the index gain as it is seen take over PGE's role.
    Slovenia's main stock index jumped 3.5 percent,
with Gorenje stocks surging 65 percent after the
appliance maker said China's Hisense Electric was
bidding for it.
    The Czech crown joined the regional rise, firming
a third of a percent versus the euro, but Czech government bond
yields did not retreat after an early surge.
    The 5-year yield hit a seven-week high, and was bid at 1.327
percent, up 12 basis points, after March annual data showed the
first pick-up in Czech inflation in six months, fuelling
expectations for further rate hikes by the Czech central bank.  
  
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1543 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4990   25.5850    +0.34%    +0.17%
 crown      >                                       
 Hungary    <EURHUF=  314.0500  315.4900    +0.46%    -1.00%
 forint     >                                       
 Polish     <EURPLN=    4.2434    4.2615    +0.43%    -1.58%
 zloty      >                                       
 Romanian   <EURRON=    4.6420    4.6450    +0.06%    +0.81%
 leu        >                                       
 Croatian   <EURHRK=    7.3895    7.3885    -0.01%    +0.55%
 kuna       >                                       
 Serbian    <EURRSD=  118.1600  118.2600    +0.08%    +0.29%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1098.31  1093.010    +0.48%    +1.87%
                                       0            
 Budapest             36851.06  36588.26    +0.72%    -6.42%
 Warsaw                2294.34   2281.12    +0.58%    -6.78%
 Bucharest             8811.09   8750.27    +0.70%   +13.64%
 Ljubljana  <.SBITOP    877.04    847.13    +3.53%    +8.76%
            >                                       
 Zagreb                1830.05   1821.36    +0.48%    -0.70%
 Belgrade   <.BELEX1    738.19    737.47    +0.10%    -2.84%
            5>                                      
 Sofia                  648.13    652.18    -0.62%    -4.33%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech Republic                                     spread
   2-year   <CZ2YT=R    0.8880    0.1250   +146bps    +14bps
            R>                                      
   5-year   <CZ5YT=R    1.3270    0.1150   +140bps    +13bps
            R>                                      
   10-year  <CZ10YT=    1.8640    0.0230   +132bps     +4bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5620   -0.0180   +214bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.4840   -0.0370   +256bps     -3bps
            R>                                      
   10-year  <PL10YT=    3.2250   -0.0390   +268bps     -2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.99      1.12      1.25      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.10      0.18      0.05
                                                    
 Poland                   1.72      1.75      1.78      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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