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CEE MARKETS-Crown hits 5-month high, forint extends losses

Jason Hovet and Anita Komuves
·4 min read

(Adds crown high, Hungary c.bank statement) By Jason Hovet and Anita Komuves PRAGUE, Jan 26 (Reuters) - The crown rebounded to a five-month high on Tuesday after the Czech central bank kept open the chances of rate hikes this year, while other central European currencies weakened on concerns over roadblocks to a $1.9 trillion U.S. stimulus plan. Hungary's forint led losses, dropping 0.3% on the day to 358.60 to the euro, extending losses after the central bank held steady on interest rates but said it would ramp up bond purchases to shore up the pandemic-hit economy. The meeting comes after a recent warning from a deputy governor that cautious policy was still justified. Bond markets took the news in stride. "The important story is that the aggressive QE (quantitative easing) program has brought yields down, yields on the 10-year bond are almost at historic lows," one trader said. Hungarian 10-year yields were bid at 2.29% on Tuesday, after a spike above 2.40% to start the year that came amid higher issuance and a rise in U.S. yields. Hungary's central bank, like others in the region, has added support to markets since last year, depressing yields. The Czech central bank has refrained from bond purchases, unlike peers, and it has struck a more hawkish tone on policy in recent months. Yields have steadily climbed since October. Central bank Governor Jiri Rusnok was quoted on Tuesday as saying in an interview with Bloomberg news agency that Czech policymakers may raise interest rates up to twice this year, or not at all. The crown erased early losses on Tuesday, rising 0.4% on the day to 26.049 by 1512 GMT and touching its highest level since August, at 26.045. The diverging policy outlook has been seen elsewhere. Romania's central bank unexpectedly cut its benchmark rate by a quarter-point to 1.25% on Jan. 15, adding to a fast fall in bond yields since elections late last year. That vote delivered a centre-right government and has cut some of the risks around the country's large fiscal deficits. Romanian 10-year bond yields have dropped to 2.86% from 3.37% seen in mid-December. Meanwhile, the spread between Hungarian and Romanian paper has narrowed to around 50 basis points, from about 120 bps, and is at its tightest since April 2017. CEE SNAPSHO AT MARKETS T 1612 CET CURRENC IES Latest Previou Daily Change s bid close change in 2021 EURCZK Czech <EURCZK 26.0490 26.1460 +0.37% +0.69% = crown => EURHUF Hungary <EURHUF 358.600 357.570 -0.29% +1.15% = forint => 0 0 EURPLN Polish <EURPLN 4.5458 4.5432 -0.06% +0.29% = zloty => EURRON Romanian <EURRON 4.8760 4.8741 -0.04% -0.23% = leu => EURHRK Croatian <EURHRK 7.5630 7.5640 +0.01% -0.21% = kuna => EURRSD Serbian <EURRSD 117.500 117.600 +0.09% +0.06% = dinar => 0 0 Note: calcula 1800 daily ted CET change from STOCKS Latest Previou Daily Change s close change in 2021 .PX Prague 1055.92 1061.07 -0.49% +2.80% 00 .BUX Budapest 43442.9 43188.9 +0.59% +3.17% 2 4 .WIG20 Warsaw <.WIG20 1973.45 1945.78 +1.42% -0.53% > .BETI Buchares 10300.2 10321.3 -0.20% +5.04% t 8 8 .SBITO Ljubljan <.SBITO 940.92 936.87 +0.43% +4.45% P a P> .CRBEX Zagreb <.CRBEX 1791.94 1779.19 +0.72% +3.03% > .BELEX Belgrade <.BELEX 731.56 732.32 -0.10% -2.28% 15 15> .SOFIX Sofia <.SOFIX 504.24 503.37 +0.17% +12.67 > % BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic CZ2YT= 2-year <CZ2YT= 0.2410 -0.0070 +096bp -1bps RR RR> s CZ5YT= 5-year <CZ5YT= 0.7470 -0.0450 +149bp -5bps RR RR> s CZ10YT <CZ10YT 1.2700 -0.0050 +181bp -1bps =RR 10-year =RR> s Poland PL2YT= 2-year <PL2YT= 0.0180 -0.0350 +074bp -4bps RR RR> s PL5YT= 5-year <PL5YT= 0.3720 -0.0220 +111bp -2bps RR RR> s PL10YT <PL10YT 1.1520 -0.0320 +170bp -4bps =RR 10-year =RR> s FRA 3x6 6x9 9x12 3M interba nk Czech <CZKFRA 0.38 0.43 0.60 0.36 Rep ><PRIBO R=> Hungary <HUFFRA 0.74 0.75 0.76 0.75 ><BUBOR => Poland <PLNFRA 0.16 0.17 0.17 0.21 ><WIBOR => Note: FRA quotes are for ask prices *********************************** *************************** (Reporting by Jason Hovet in Prague, Anita Komuves in Budapest, and Luiza Ilie in Bucharest; Editing by Jan Harvey and Ed Osmond)