×

CEE MARKETS-Zloty firms as investors mull likelihood of Polish rate hike

* Dissent in Polish central bank may mean earlier hike

* Zloty leads rise in CEE currencies

* Hawkish ECB minutes could put pressure on CEE asset prices

* German yield rise may curb demand at Hungarian auction

BUDAPEST, July 6 (Reuters) - Central European currencies firmed on Thursday but there was some reticence after the Polish central bank governor reiterated his view that rates would not start to rise from record low levels this year or next. There was also caution ahead of the publication later in the day of the minutes from the European Central Bank's last policy meeting. Should these be more hawkish than expected, they could weigh on Central European assets. The zloty led the slight rise, firming 0.2 percent to 4.234 against the euro by 0819 GMT, regaining the ground shed in the previous session as the central bank retained its loose policy stance. Poland's central bank, reporting after its latest policy meeting, said inflation remained moderate, but some analysts pointed to increasing divisions within the Monetary Policy Council over inflation risks and the impact of negative real interest rates on savings. The bank's communication on these matters is "contradictory", said Nomura analyst Peter Attard Montalto in a note. "This means the minutes (of the bank's meetings) will be more important going forward." Montalto said he believed a rate hike in mid-2018 remained likely. Danske Bank said in a note that the bank was too relaxed about a likely rise in inflation next year, and that it could still prompt rate hike discussions later this year. Stronger rate hike expectations could support the zloty. A tapering of monetary stimulus in the euro zone by the ECB could hit demand in the European Union's eastern markets, and the prospect of higher yields in the West would make the region's government debt relatively less attractive. Bonds on offer at Hungary's auctions on Thursday are expected to be bought up, though demand could be weaker than at earlier auctions, and yields could rise a bit, with German yields also rising, one Budapest-based fixed income trader said. "Germany's 10-year bond yield is again banging on the 0.5 percent level, and a break above it could also mean a rise in our bond yields," the trader said. Romania could sell 10-year bonds at an average yield of 4 percent, a tick up from Wednesday's closing bid of 3.99 percent, Bucharest-based ING said in a note. The sale could draw decent demand as Romanian markets are recovering from the past two weeks' jitters, helped by speculation in the local media that the government could water down a new plan to overhaul corporate taxes. Budapest led a rise in regional equities prices, with the stocks of OTP Bank reaching a 10-year peak. The shares of road haulage firm Waberer's rose 1.1 percent as they launched Budapest bourse. The shares are not part of the bourse's index yet.

CEE MARKETS SNAPSH AT 1019 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.100 26.091 -0.03% 3.48% 0 5 Hungary 308.70 308.71 +0.00 0.04% forint 00 50 % Polish zloty 4.2340 4.2408 +0.16 4.01%

%

Romanian leu 4.5865 4.5907 +0.09 -1.12%

%

Croatian kuna 7.4030 7.4105 +0.10 2.05%

%

Serbian dinar 120.31 120.41 +0.08 2.53% 00 00 % Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Budapest 35552. 35298. +0.72 +11.0 70 14 % 9% Warsaw 2319.8 2307.4 +0.54 +19.1 8 9 % 0% Bucharest 8168.9 8142.4 +0.33 +15.3 4 0 % 0% Ljubljana 792.95 796.29 -0.42% +10.5

0%

Zagreb 1879.4 1878.5 +0.05 -5.78% 4 0 % Belgrade 711.54 713.88 -0.33% -0.81% Sofia 711.24 711.42 -0.03% +21.2

8% BONDS

Yield Yield Spread Daily (bid) change vs change Bund in

Poland

2-year 1.839 -0.187 +243b -20bps

ps

5-year 2.654 0.001 +278b -2bps

ps

10-year 3.311 0.004 +282b -2bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Hungary <BU 0.21 0.23 0.25 0.15

BOR=>

Poland <WI 1.751 1.77 1.819 1.73

BOR=>

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

(Additional reporting by Radu Marinas; Editing by Raissa Kasolowsky)