November 8, 2018 / 10:15 AM / 8 months ago

CEE MARKETS-Hungarian bond yields up as surprise CPI rise causes worry

    * Hungary's CPI unexpectedly rises in Oct, lifting yields
    * Forint briefly touches 3-month high vs euro after CPI data
    * Polish yields rise further slowly after CPI forecast rise
    * Serbian central meets, seen holding fire

    By Sandor Peto
    BUDAPEST, Nov 8 (Reuters) - Hungarian long-term government
bond yields rose and the forint reversed a firming on Wednesday
after inflation unexpectedly  rose in October.
    The rise is unlikely to trigger policy tightening from the
Hungarian central bank (NBH) this year, but makes next year's
outlook uncertain, analysts said.
    The central bank of Poland, Central Europe's biggest
economy, increased its own inflation forecasts on Wednesday, but
kept its loose policy stance. 
    Hungary's annual inflation rose to 3.8 percent, near the top
of the NBH's 2-4 percent target range, even though analysts had
predicted an unchanged rate from October's 3.6 percent.
    The forint firmed to a 3-month high of 320.9 against the
euro just after the figures were published, but retreated to
321.58 by 0927 GMT, down 0.1 percent from Wednesday, in line
with a weakening of the zloty and the leu
    "It may have firmed initially because the figures may make
the NBH think," one Budapest-based currency dealer said.
    The dealer added, though, that any monetary policy
tightening was unlikely this year.
    One Budapest-based fixed income trader agreed.
    The trader said inflation concerns caused a 7 basis point
rise in the yield of 10-year Hungarian government bonds
 in the secondary market to 3.62 percent, while low
NBH rates prevent a rise at the short end of the yield curve.
    "At today's auctions, the bonds on offer could be
sold at the current (increased) secondary market yields," the
trader said.
    "The NBH is unlikely to overreact the figures, and this
makes the yield curve steeper."
    Underlying inflation measures showed a pick-up in October,
the bank said on its website, adding that volatile fuel and
unprocessed food prices and a tobacco excise duty rise fuelled a
pick-up in inflation in the autumn.
    ING analyst Peter Virovacz said a rise in the price of
durable consumer goods was the biggest in more than two years.
    "It can easily happen that core inflation will reach the
target line (of 3 percent) earlier than the NBH had predicted
(for the middle of 2019)," he said in a note. 
    The Polish central bank blamed power prices for the
inflation rise, while its Governor Adam Glapinski repeated that
record low interest rates were unlikely to rise next year, and
possibly even longer.
    Polish bond yields extended a rise after his comments on
Wednesday, and continued to rise slowly on Thursday, with the
5-year paper trading at 2.48 percent, up one basis
    Elsewhere in the region, the dinar firmed a shade
as the Serbian central bank met. It is expected to keep its
benchmark rate on hold at 3 percent.
    Regional stock indices were mixed, driven by earnings
reports. Weaker than expected results drove Hungarian
pharmaceuticals Richter down by about 3 percent, while
oil group MOL gained 1.7 percent and Czech lender
Komercni Banka firmed by 2.3 percent.
            CEE       SNAPSHOT   AT                         
            MARKETS             1027 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8530   25.8810    +0.11%    -1.20%
 crown      >                                       
 Hungary    <EURHUF=  321.5800  321.4000    -0.06%    -3.32%
 forint     >                                       
 Polish     <EURPLN=    4.2930    4.2885    -0.10%    -2.72%
 zloty      >                                       
 Romanian   <EURRON=    4.6631    4.6605    -0.06%    +0.36%
 leu        >                                       
 Croatian   <EURHRK=    7.4318    7.4343    +0.03%    -0.02%
 kuna       >                                       
 Serbian    <EURRSD=  118.2400  118.3600    +0.10%    +0.22%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1088.18  1075.790    +1.15%    +0.93%
 Budapest             38199.43  38198.00    +0.00%    -2.99%
 Warsaw                2271.52   2276.65    -0.23%    -7.71%
 Bucharest             8681.80   8671.98    +0.11%   +11.97%
 Ljubljana  <.SBITOP    810.05    807.33    +0.34%    +0.46%
 Zagreb                1784.48   1783.95    +0.03%    -3.17%
 Belgrade   <.BELEX1    747.61    747.15    +0.06%    -1.60%
 Sofia                  594.20    592.62    +0.27%   -12.29%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.6760    0.2010   +229bps    +20bps
   5-year   <CZ5YT=R    1.8710    0.0420   +201bps     +3bps
   10-year  <CZ10YT=    2.1450    0.0270   +169bps     +1bps
   2-year   <PL2YT=R    1.5910    0.0440   +221bps     +4bps
   5-year   <PL5YT=R    2.5020    0.0370   +264bps     +3bps
   10-year  <PL10YT=    3.2300    0.0040   +277bps     -1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.11      2.20      2.45      1.97
 Hungary                  0.33      0.61      0.97      0.16
 Poland                   1.78      1.84      1.93      1.72
 Note: FRA  are for ask prices                              
0 : 0
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