Bond yields rise after higher-than-expected CPI figures

* Hungary, Romania Aug CPI come in higher than forecast
* Government bond yields rise, also tracking Bunds
* Budapest, Bucharest cbanks watched after CPI surprise

By Sandor Peto
BUDAPEST, Sept 11 (Reuters) - Central European government
bond yields rose on Tuesday after higher-than-expected August
inflation figures from the region, and as Bund yields also
After data on Monday showed a bigger-than-forecast pick-up
in Czech inflation in August, Romania's and Hungary's figures
also came in above expectations on Tuesday.
Hungary's headline inflation was unchanged at 3.4 percent,
supported by rising food prices. Analysts said that may mean
inflation will hold above 3 percent - the midpoint of the
central bank's (NBH) 2-4 percent target range - for the rest of
the year.
The NBH is unlikely to change record low interest rates at
its meeting next Tuesday, when it will also discuss its
quarterly inflation report, but it may disclose some details of
future policy tightening, market participants said.
"September meetings usually offer a good opportunity if they
want to communicate a change in policy," one Budapest-based
fixed income trader said.
Hungarian government bond yields rose 2-5 basis points
relative to Monday's fixing, with the curve
steepening and 10-year paper trading at 3.52 percent.
Corresponding Bund yields rose about 2 basis points to a
5-week high as growing hopes of fiscal restraint in Italy and a
deal for Britain's exit from the EU eroded demand for safe-haven
Hungarian yields have risen 15-20 basis points in the past
three weeks, luring back foreign buyers. Their Hungarian bond
holdings rose last week to the highest level since
January 2016.
In contrast, Romania's 10-year bond yield has fallen more
than 50 basis points since late June as inflation fell sharply
to 4.6 percent in July from a 5-year high of 5.4 percent in
June, contributing to less hawkish rhetoric from the central
Comments from the Romanian central bank will be closely
watched after Tuesday's data showed inflation rose to 5.1
percent in August, above analysts' 4.8 percent forecasts. Core
inflation was little changed.
"We think that disinflation will resume in September but our
forecast about an inflation rate of 3.5 percent in December is
at risk after today's data," Erste analyst Eugen Sinca said in a
The yield on Romania's 10-year government paper was bid
higher by 2 basis points at 4.87 percent.
The leu eased by 0.1 percent to 4.6326 against the
euro by 0950 GMT.
Other Central European currencies gave up the gains they
posted earlier in the session when the dollar was
retreating. The greenback's firming periods have often caused
selling in the region's currency markets this year.

Latest Previous Daily Change
bid close change in 2018
Czech <EURCZK= 25.6470 25.6300 -0.07% -0.41%
crown >
Hungary <EURHUF= 324.5500 324.5100 -0.01% -4.20%
forint >
Polish <EURPLN= 4.3128 4.3151 +0.05% -3.16%
zloty >
Romanian <EURRON= 4.6325 4.6263 -0.13% +1.02%
leu >
Croatian <EURHRK= 7.4210 7.4215 +0.01% +0.13%
kuna >
Serbian <EURRSD= 118.3500 118.3700 +0.02% +0.13%
dinar >
Note: calculated from 1800 CET

Latest Previous Daily Change
close change in 2018
Prague 1080.15 1082.850 -0.25% +0.18%
Budapest 36823.56 37202.89 -1.02% -6.49%
Warsaw 2244.51 2270.83 -1.16% -8.80%
Bucharest 8318.38 8331.45 -0.16% +7.28%
Ljubljana <.SBITOP 861.05 863.09 -0.24% +6.78%
Zagreb 1792.88 1797.95 -0.28% -2.71%
Belgrade <.BELEX1 722.49 722.41 +0.01% -4.91%
Sofia 628.19 628.80 -0.10% -7.27%
Yield Yield Spread Daily
(bid) change vs Bund change
Czech spread
2-year <CZ2YT=R 1.5020 0.0320 +205bps +3bps
5-year <CZ5YT=R 1.8040 0.0310 +200bps +2bps
10-year <CZ10YT= 2.1550 0.0110 +174bps +0bps
2-year <PL2YT=R 1.6440 0.0100 +219bps +1bps
5-year <PL5YT=R 2.5950 0.0000 +280bps -1bps
10-year <PL10YT= 3.2850 0.0170 +287bps +1bps
3x6 6x9 9x12 3M
Czech Rep 1.91 2.08 2.19 1.52
Hungary 0.60 0.81 1.03 0.21

Poland 1.77 1.79 1.85 1.71

Note: FRA are for ask prices

(Reporting by Sandor Peto; Editing by Kirsten Donovan)

2018-09-11 12:35:58

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