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Currencies, bonds firm as ECB seen extending asset buying


Reuters

By Sandor Peto

BUDAPEST, Oct 13 (Reuters) - Central European currencies and government bonds mostly firmed slightly after sources told Reuters that the European Central Bank is likely to extend its asset purchases.

The also crown got some support from hawkish comments from Czech central banker Vojtech Benda.

But price movements in regional markets were limited due to the caution ahead of U.S. inflation figures due in the afternoon. Signs of the Fed moving towards an interest rate rise could make regional assets less attractive as the potential reward over U.S. assets diminishes.

"The figures, even if they increase the odds of a December Fed rate hike, could not cause a big market retreat: a hike looks like a done deal, anyway," one Budapest-based fixed income trader said.

"The report on the ECB had more weight: markets have taken it as a dovish signal," the trader added.

Five people with direct knowledge of the discussion told Reuters that ECB policymakers broadly agreed to extend asset purchases at a lower volume at their October meeting, with views converging on a nine-month extension, and ranging between 25 billion and 40 billion euros a month, compared with 60 billion euros now.

The ECB's asset purchases in the euro zone have indirectly also lifted demand for relatively high-yielding Central European assets.

Hungarian government bond yields dropped by 2-3 basis points. The 10-year benchmark paper traded at 2.59 percent.

The Polish yield curve flattened a little, with the 10-year yield dropping 4 basis points to 3.335 percent, its lowest level since a downtrend of the dollar started to trigger zloty and forint buying early this month.

The zloty, gaining 0.2 percent by 0858 GMT, hit a one-month high against the euro.

The forint firmed 0.1 percent to 308.35, touching a 3-week high. Piercing its 200-day moving average, it may head to 307, Erste Group'sBudapest brokerage arm said in a note.

Its firming through 310 on Wednesday already boosted speculation that the Hungarian central bank may further loosen monetary policy screws.

In Poland, FRAs <PLN12X15F= > have showed an opposite trend, with expectations strengthening that the Polish central bank will start to hike interest rates earlier than late 2018.

The Czech has been the only central bank in the European Union that has increased rates since 2012.

The economy would benefit from a 50-75 basis point interest rate increase before the end of this year, one of the seven Czech central bank rate setters, Vojtech Benda was quoted as saying on Thursday.

The crown firmed only 0.1 percent on Friday to 25.843 against the euro.

"Mr. Benda is just one of 7 illuminatis," Komercni Banka traders said in a note.

CEE MARKETS

SNAPSHOT

AT 1058 CET

CURRENCIES

Latest

Previous

Daily

Change

bid

close

change

in 2017

Czech crown

25.8430

25.8685

+0.10%

4.50%

Hungary forint

308.3500

308.6050

+0.08%

0.15%

Polish zloty

4.2604

4.2675

+0.17%

3.37%

Romanian leu

4.5880

4.5890

+0.02%

-1.16%

Croatian kuna

7.5100

7.5097

+0.00%

0.60%

Serbian dinar

119.3000

119.3600

+0.05%

3.39%

Note: daily change

calculated from

previous

close at

1800 CET

STOCKS

Latest

Previous

Daily

Change

close

change

in 2017

Prague

1053.04

1054.88

-0.17%

+14.26%

Budapest

38591.98

38772.08

-0.46%

+20.59%

Warsaw

2532.82

2537.69

-0.19%

+30.03%

Bucharest

8030.90

7997.22

+0.42%

+13.35%

Ljubljana

815.87

813.57

+0.28%

+13.70%

Zagreb

1862.07

1863.29

-0.07%

-6.66%

Belgrade

725.54

727.79

-0.31%

+1.14%

Sofia

669.78

668.31

+0.22%

+14.21%

BONDS

Yield

Yield

Spread

Daily

(bid)

change

vs Bund

change in

Czech Republic

spread

2-year

0.086

0

+081bps

+1bps

5-year

0.527

0.014

+082bps

+3bps

10-year

1.366

-0.006

+094bps

+2bps

Poland

2-year

1.714

-0.007

+243bps

+0bps

5-year

2.681

-0.005

+298bps

+2bps

10-year

3.343

-0.024

+292bps

+0bps

FORWARD

RATE

AGREEMENT

3x6

6x9

9x12

3M interbank

Czech Rep

0.78

0.91

1.03

0

Hungary

0.08

0.11

0.15

0

Poland

1.764

1.805

1.874

1.73

Note: FRA quotes

are for ask prices

**************************************************************




This article appears in: Stocks , World Markets , Politics


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