Czech crown gains; central banker says room for rate rise

* Crown gains as rate-setter Benda sees room for rate
increase
* Loose Fed, euro zone growth concern blurs CEE rate outlook
* Hungarian rates jump on retail bond sale success

By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, June 13 (Reuters) - The crown gained on
Thursday after a Czech central bank board member said he still
saw room to raise interest rates. Other Central European
currencies fell.
The remarks by Czech policy-maker Vojtech Benda came in a
Bloomberg interview that followed similarly hawkish comments
made the governor of the central bank, Jiri Rusnok, on Tuesday.

The outlook for Central European interest rates is unclear.
The Federal Reserve is expected to cut rates soon and the
European Central Bank might eventually follow suit. Central
Europe's economies are linked with both regions, especially the
euro zone. But surging wages are fuelling inflation in Central
Europe, putting pressure on its central banks to raise rates.
The uncertainty over rates is the most visible in the Czech
Republic, where forward rate agreements price in rate
cuts, after eight rate increases since 2017.
The crown rose to 25.58 versus the euro by 0844
GMT. The forint and the zloty each fell
0.1%.
The leu continued to fall from five-month highs,
trading at 4.7245 versus the euro, after April figures showed
weak annual growth in industrial output and a widening in the
current account deficit in Romania.
The central bank is widely expected to fight inflation by
tightening liquidity in leu markets, but some analysts said
after Tuesday's higher-than-expected inflation data that the
bank may discuss a rate increase.
In Hungary, the successful introduction of a new retail
government bond reduced forint liquidity, casting doubt on the
need of a further cut in the central bank's liquidity-creating
FX swaps at its meeting on June 25.
The overnight BUBOR interbank interest rate has
quadrupled since last week, to 0.24 percent, rising above longer
maturities.
Depressed Bund and U.S. Treasury yields, coupled with the
strong retail bond sales, can help Hungary's debt agency AKK to
lengthen the average maturity of its outstanding debt, traders
said.
Government bond yields were mostly flat in the region.
Hungary's 10-year bond traded around 2.8%.

CEE SNAPSHOT AT
MARKETS 1044 CET
CURRENCI
ES
Latest Previous Daily Change
bid close change in 2019
Czech <EURCZK= 25.5800 25.5820 +0.01% +0.50%
crown >
Hungary <EURHUF= 322.2500 322.0000 -0.08% -0.36%
forint >
Polish <EURPLN= 4.2605 4.2580 -0.06% +0.68%
zloty >
Romanian <EURRON= 4.7245 4.7235 -0.02% -1.49%
leu >
Croatian <EURHRK= 7.4170 7.4115 -0.07% -0.09%
kuna >
Serbian <EURRSD= 117.9800 118.0100 +0.03% +0.27%
dinar >
Note: calculated from 1800 CET
daily
change

Latest Previous Daily Change
close change in 2019
Prague 1054.36 1051.990 +0.23% +6.87%
0
Budapest 40764.97 40592.32 +0.43% +4.15%
Warsaw 2286.98 2282.80 +0.18% +0.45%
Bucharest 8577.98 8591.06 -0.15% +16.17%
Ljubljana <.SBITOP 872.22 870.54 +0.19% +8.45%
>
Zagreb 1912.50 1912.85 -0.02% +9.36%
Belgrade <.BELEX1 731.91 731.10 +0.11% -3.91%
5>
Sofia 577.17 578.63 -0.25% -2.91%
BONDS
Yield Yield Spread Daily
(bid) change vs Bund change
in
Czech spread
Republic
2-year <CZ2YT=R 1.6860 0.0790 +235bps +8bps
R>
5-year <CZ5YT=R 1.5020 -0.0230 +210bps -2bps
R>
10-year <CZ10YT= 1.6230 0.0120 +187bps +2bps
RR>
Poland
2-year <PL2YT=R 1.6380 -0.0260 +231bps -2bps
R>
5-year <PL5YT=R 2.0120 -0.0140 +261bps -1bps
R>
10-year <PL10YT= 2.5000 -0.0020 +275bps +1bps
RR>
FORWARD RATE AGREEMEN
T
3x6 6x9 9x12 3M
interban
k
Czech Rep 2.15 2.05 1.96 2.17
<PRIBOR=
>
Hungary 0.29 0.44 0.57 0.18

Poland 1.75 1.72 1.71 1.72

Note: FRA are for ask prices
quotes
*************************************************
*************

(Additional reporting by Radu Marinas in Bucharest, editing by
Larry King)



2019-06-13 12:16:11

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