June 12, 2018 / 2:59 PM / 5 days ago

CEE MARKETS-Inflation hits Hungarian bonds, forint rebounds

    * Hungary's 10-year bond yield sets 13-month high
    * Romanian inflation surprises, rising to five-year high
    * Fed and ECB meetings, if hawkish, could increase pressure
    * Czech central bank caps mortgage lending

 (Adds forint rebound, new comment, Czech cap on mortgage
lending)
    By Sandor Peto and Luiza Ilie
    BUDAPEST/BUCHAREST, June 12 (Reuters) - Hungary's 10-year
government bond yield hit 13-month highs on Tuesday as higher
than expected inflation data across Central Europe sparked
worries over the country's loose monetary policy.
    The yield has risen more than 20 basis points in the past
three sessions, and hitting a 13-month high at 3.31 percent it
traded above Poland's 3.25 percent. In January it was more than
a percentage point below its Polish peer.    
    The Hungarian central bank (NBH) has pledged to keep its
short-term base rate at record lows for years and long-term
yields also relatively low.
    But a rally of the dollar and U.S. Treasury yields has 
boosted Hungary's 10-year yield in the past two months, knocking
the forint to its weakest level against the euro and the Polish
zloty in almost two years.
    A rise in inflation in Central Europe in May -- and the risk
that U.S. and euro zone rate setters will send a hawkish message
from their meetings this week -- raised question marks over the
NBH's policy intentions.
    "The central bank has been able to guide market expectations
well for years ... Amid much more messy conditions, it is hard
to see into their thinking now," one Budapest-based trader said.
    Rumours about comments made by a senior rate setter to
investors at closed meetings in London and Budapest did not
alleviate a feeling of confusion, traders said.
    "I am a bit tired of this (confusing rumours), frankly,"
another trader said. "People will look at the bank's statement
next week (after its Tuesday meeting) with a magnifying glass."
    The Hungarian central bank declined to comment in response
to Reuters' questions.
    While bond yields rose, the forint rebounded sharply from
Monday's plunge against its most liquid regional peer, the
zloty..
    It firmed half a percent against the euro to 319.8
by 1409 GMT, while the zloty shed 0.1 percent.
    One dealer said the firmer forint could reflect expectations
that the NBH might tighten policy sooner than expected. 
    The Czech crown was flat after figures released on
Monday showed a rise in Czech annual inflation to 2.2 percent in
May, above the central bank's 2 percent target, boosting the
chances that it will increase interest rates further as early as
August.
    Romania on Tuesday reported a rise in annual inflation in
May to a five-year high of 5.4 percent, above forecasts.
Serbia's inflation picked up to 2.1 percent from 1.1 percent in
April.
    The Czech central bank capped mortgage loans at nine times
borrowers annual salaries on Tuesday.
     Shares in Moneta Money Bank and Komercni Banka
 eased slightly, but the impact was mild as some
investors had expected even tougher measures from the central
bank to prevent the build-up of a lending bubble.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1609 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.6520   25.6500    -0.01%    -0.43%
 crown      >                                       
 Hungary    <EURHUF=  319.8000  321.4000    +0.50%    -2.78%
 forint     >                                       
 Polish     <EURPLN=    4.2740    4.2680    -0.14%    -2.28%
 zloty      >                                       
 Romanian   <EURRON=    4.6610    4.6580    -0.06%    +0.40%
 leu        >                                       
 Croatian   <EURHRK=    7.3795    7.3793    -0.00%    +0.69%
 kuna       >                                       
 Serbian    <EURRSD=  118.1800  118.1000    -0.07%    +0.27%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1079.88  1077.280    +0.24%    +0.16%
                                       0            
 Budapest             36418.45  36606.38    -0.51%    -7.51%
 Warsaw                2254.95   2234.52    +0.91%    -8.38%
 Bucharest             8285.67   8257.51    +0.34%    +6.86%
 Ljubljana  <.SBITOP    889.59    897.59    -0.89%   +10.32%
            >                                       
 Zagreb                1824.88   1827.25    -0.13%    -0.98%
 Belgrade   <.BELEX1    730.12    732.51    -0.33%    -3.91%
            5>                                      
 Sofia                  632.33    629.59    +0.44%    -6.66%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.0800   -0.0270   +170bps     -2bps
            R>                                      
   5-year   <CZ5YT=R    1.5940    0.0700   +173bps     +6bps
            R>                                      
   10-year  <CZ10YT=    2.1410    0.0160   +164bps     +1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5980    0.0000   +222bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.4560   -0.0270   +259bps     -3bps
            R>                                      
   10-year  <PL10YT=    3.2990    0.0130   +280bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.18      1.33      1.45      0.92
            <PRIBOR=                                
            >                                       
 Hungary                  0.31      0.45      0.18      0.12
                                                    
 Poland                   1.74      1.77      1.82      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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