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CEE MARKETS-Forint jumps as Hungary central bank increases firepower

·4 min read

(Updates after Hungary c.bank) By Jason Hovet and Anita Komuves PRAGUE/BUDAPEST, April 7 (Reuters) - The forint jumped to a one-week peak to lead central Europe higher on Tuesday as investor hopes that the corovavirus spread could start to level out boosted riskier assets and Hungary's central bank launched measures to soothe financial markets. The Hungarian central bank (NBH) raised its overnight collateralised loan rate and one-week collateralised loan rate and also said it would launch government bond purchases on the secondary market, which dealers said would help push yields lower. "It is obvious that the NBH is very determined to do what they have been saying for a while, that is, to flatten the far end of the curve and bring yields under 3% there," a trader said. Capital Economics said "alarm bells seem to be ringing" in a note on the measures. The action goes along with a government push that will cause the budget deficit to swell to 2.7% of gross domestic product this year from a targeted 1%. Prime Minister Viktor Orban said on Monday the stimulus, which includes subsidised loans to Hungarian companies and funds to preserve jobs, would amount to 18%-20% of GDP, including central bank programmes. The forint doubled gains in the afternoon after the central bank, trading 2% up at 356.80to the euro by 1350 GMT, further away from a record low of 369.54 hit on April 1. The currency has been one of the hardest hit in central Europe by investor flight, even before the coronavirus outbreak hit the region in force in March. However, a Reuters poll last week forecast a steady rebound starting in the region. The Czech crown was up 1.3% at 27.200 to the euro on Tuesday, leaving behind multi-year lows hit in recent weeks. Poland's zloty added 0.8%. Stock markets also gained as tapering of the coronavirus toll in certain European and U.S. hotspots boosted risk appetite. Warsaw rose 3.8% and Budapest was up 3.3%. Analysts remain cautious as data will only start to show the outbreak's impact on central Europe's export-driven economies that have faced factory shutdowns in recent weeks and face hardship similar to the 2008 global financial crisis. On bond markets, Czech yields were mixed after the finance ministry announced on Monday unscheduled bond auctions for Wednesday as it ramps up borrowing. Dealers have said demand remains solid for Czech paper, helped by expectations of the central bank further cutting interest rates after a reduction of 125 basis points last month. CEE SNAPSHO AT MARKETS T 1550 CET CURRENC IES Latest Previou Daily Change s bid close change in 2020 EURCZK Czech <EURCZK 27.2000 27.5500 +1.29% -6.50% = crown => EURHUF Hungary <EURHUF 356.800 363.780 +1.96% -7.19% = forint => 0 0 EURPLN Polish <EURPLN 4.5268 4.5626 +0.79% -5.97% = zloty => EURRON Romanian <EURRON 4.8320 4.8295 -0.05% -0.90% = leu => EURHRK Croatian <EURHRK 7.6295 7.6265 -0.04% -2.41% = kuna => EURRSD Serbian <EURRSD 117.550 117.600 +0.04% +0.02% = dinar => 0 0 Note: calcula 1800 daily ted CET change from STOCKS Latest Previou Daily Change s close change in 2020 .PX Prague 832.71 807.950 +3.06% -25.36% 0 .BUX Budapest 33948.0 32858.7 +3.32% -26.33% 8 5 .WIG20 Warsaw <.WIG20 1640.40 1581.05 +3.75% -23.71% > .BETI Buchares 8080.20 7706.49 +4.85% -19.01% t .SBITO Ljubljan <.SBITO 780.64 735.66 +6.11% -15.68% P a P> .CRBEX Zagreb <.CRBEX 1591.14 1581.19 +0.63% -21.13% > .BELEX Belgrade <.BELEX 672.38 664.25 +1.22% -16.13% 15 15> .SOFIX Sofia <.SOFIX 434.60 427.78 +1.59% -23.50% > BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic CZ2YT= 2-year <CZ2YT= 1.0070 0.0540 +164bp +3bps RR RR> s CZ5YT= 5-year <CZ5YT= 1.1740 -0.0210 +173bp -8bps RR RR> s CZ10YT <CZ10YT 1.5260 0.0950 +187bp +0bps =RR 10-year =RR> s Poland PL2YT= 2-year <PL2YT= 0.9680 -0.1110 +160bp -14bps RR RR> s PL5YT= 5-year <PL5YT= 1.2880 -0.0040 +185bp -6bps RR RR> s PL10YT <PL10YT 1.6230 -0.0360 +196bp -13bps =RR 10-year =RR> s FRA 3x6 6x9 9x12 3M interba nk Czech <CZKFRA 0.36 0.38 0.46 1.01 Rep ><PRIBO R=> Hungary <HUFFRA 1.19 1.20 1.20 0.92 ><BUBOR => Poland <PLNFRA 0.58 0.45 0.44 1.17 ><WIBOR => Note: FRA quotes are for ask prices ******************************************** ****************** (Reporting by Jason Hovet in Prague and Anita Komuves in Budapest; editing by Nick Macfie)