Leu and short-term Romanian rates jump on central bank tender

Leu and short-term Romanian rates jump on central bank tender
* Romania tightens liquidity via surprise deposit tender
* Short-term Romanian interest rates at multi-month highs
* Rates could rise further in May -analyst
* CEE looks less risky than other regions -analyst
* S&P surprised by raising Poland's rating outlook to

By Sandor Peto and Radu-Sorin Marinas
BUDAPEST/BUCHAREST, April 16 (Reuters) - The leu led a
firming of Central European currencies and short-term Romanian
market interest rates jumped to multi-month highs on Monday
after the central bank (NBR) held a surprise deposit tender.
The tender, which follows a jump in Romania's March annual
inflation to a five-year high of 5 percent, channelled 18.7
billion leu off the interbank market at a 2.25 percent interest
The facility, unused since 2011, effectively provides
monetary tightening through a liquidity cut, analysts said.
The NBR also said in the minutes of its April 4 meeting that
the annual inflation rate could rise marginally and then level
off above the variation band of its target over several months.
Short-term interbank interest rates jumped after the tender,
with the overnight deposit rate bid at 1.55 percent, a
four-month high.
The yield on two-year benchmark bonds rose 30 basis points
to 2.78 percent.
The NBR's measure to tighten market liquidity is probably a
precursor rather than a replacement of further benchmark rate
hikes, said Erste analyst Horia Braun-Erdei.
"For the May monetary policy meeting, the odds between a
policy hike and 'no hike' are now more evenly balanced, given
the effective and significant tightening implemented today," he
said in a note. "We marginally still favour a hike scenario."
The NBR's tightening measure may have caught the finance
ministry off guard, he added. It rejected all bids at its own
tenders of one-year Treasury bills and 10-year bonds.

The leu firmed 0.3 percent to 4.6496 against the
euro by 1336 GMT.
The Czech crown, the forint and the
zloty also firmed, all hitting their highest in
between two and three months, indicating that the leu
strengthening was part of a regional trend.
The crown has also been helped by expectations of
a further increase in the Czech central bank rate, while the
Hungarian and Polish central banks have signalled that they
could keep rates at record lows for years.
Investors have turned to the region's currency markets as a
safe haven amid recent jitters in global markets, particularly
in emerging markets such as Russia and Turkey, ING analyst Peter
Virovacz said.
"Huge excitements, like trade war fears, the Syrian conflict
or the Russian story (of sanctions from the United States) have
all left the CEE region alone," he said.
After rising in recent weeks, Polish and Hungarian
government bond prices retreated on profit-taking.
Poland's 10-year yield rose 6 basis points to 3.079 percent,
even though Standard & Poor's surprised late on Friday by
changing the outlook on Poland's credit rating to positive from

Latest Previous Daily Change
bid close change in 2018
Czech <EURCZK= 25.2620 25.3050 +0.17% +1.11%
crown >
Hungary <EURHUF= 310.2300 310.8000 +0.18% +0.22%
forint >
Polish <EURPLN= 4.1589 4.1664 +0.18% +0.42%
zloty >
Romanian <EURRON= 4.6496 4.6635 +0.30% +0.65%
leu >
Croatian <EURHRK= 7.4120 7.4155 +0.05% +0.25%
kuna >
Serbian <EURRSD= 117.9400 118.1500 +0.18% +0.47%
dinar >
Note: calculated from 1800 CET

Latest Previous Daily Change
close change in 2018
Prague 1139.19 1134.270 +0.43% +5.66%
Budapest 38231.88 38351.65 -0.31% -2.91%
Warsaw 2296.98 2310.32 -0.58% -6.67%
Bucharest 8882.15 8871.04 +0.13% +14.55%
Ljubljana <.SBITOP 838.31 836.75 +0.19% +3.96%
Zagreb 1775.82 1782.45 -0.37% -3.64%
Belgrade <.BELEX1 741.22 739.45 +0.24% -2.45%
Sofia 661.91 663.22 -0.20% -2.29%
Yield Yield Spread Daily
(bid) change vs Bund change
Czech spread
2-year <CZ2YT=R 0.7930 0.0930 +136bps +10bps
5-year <CZ5YT=R 1.1910 -0.0130 +127bps -2bps
10-year <CZ10YT= 1.8120 0.0260 +128bps +1bps
2-year <PL2YT=R 1.5550 0.0140 +213bps +2bps
5-year <PL5YT=R 0.0000 0.0750 +008bps +7bps
10-year <PL10YT= 3.0920 0.0470 +256bps +3bps
3x6 6x9 9x12 3M
Czech Rep 0.95 1.05 1.19 0.90
Hungary 0.57 0.09 0.15 0.03

Poland 1.72 1.74 1.78 1.70

Note: FRA are for ask prices

(Reporting by Sandor Peto
Editing by Gareth Jones and David Goodman)

First Published: 2018-04-16 11:47:14
Updated 2018-04-16 16:15:10

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