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REFILE-CEE MARKETS-Crown firms after Czechs deliver first EU rate hike for years

years@ (Refiles to update headline)

* Crown jumps as CNB lifts rates, surprising part of the market

* Hike is the CNB's first since 2018, EU's first since 2012

* CEE central banks unlikely to follow CNB's hike this year

BUDAPEST/PRAGUE, Aug 3 (Reuters) - The crown surged on Thursday after the Czech central bank (CNB) delivered the the European Union's first central bank interest rate hike for more than five years to fight inflation. The 20 basis point hike in the two-week repo rate to 0.25 percent had not been expected by half of the analysts in a Reuters poll, and had not been priced in by markets, . It was the first Czech rate rise since 2008. The crown touched 25.9 against the euro, its strongest level since April when the CNB abandoned a cap which had kept the crown weaker than 27 since late 2013. It traded at 25.965 by 1139 GMT, up half a percent. Czech interest rates swaps (IRSs) ticked up around 5 basis points, short-end forward rate agreements rose 10 basis points and bond bid/ask spreads widened, but few deals were struck. The stocks of lenders Erste and Komercni Banka extended their gains after the decision, leading a 0.4 percent rise in the Prague bourse's main stock index. The crown, which weakened to a one-month low of 26.172 earlier this week, traded at the levels where analysts in a Reuters poll projected it to be at the end of this month. The poll predicted a gradual strenghtening to 25.5 in the next 12 months, and projected stronger than expected courses for the region's main currencies, with Europe's economic growth powering ahead. The Czech economy is also picking up. With inflation running at 2.3 percent in June, above the 2 percent midpoint of the target range, the CNB had become the first central bank in the region which indicated that rate tightening could come soon. Sceptics had said that the crown firmed a good clip since being set free in April, and its strengthening had tightened monetary conditions enough. The CNB was also uncertain over how soon the European Central Bank will drop its own ultra-loose policy of bond purchases. "Future (CNB) decisions will be highly dependent on the inflation path and the state of the economy, which has recently been feared to be overheating," said Natalia Kornela Setlak, analyst of Nordea in a note. Romania's central bank is unlikely to follow the example of the Czech hike at its meeting on Friday, according to another Reuters poll. None of the region's central banks are seen lifting rates this year. Elsewhere, the government bonds of Hungary, which have much higher yields than Czechs, drew strong demand at two auctions on Thursday.

CEE MARKETS SNAPSH AT 1339 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 25.965 26.103 +0.53 4.01% 0 0 % Hungary 303.65 303.59 -0.02% 1.70% forint 00 50 Polish zloty 4.2520 4.2576 +0.13 3.57%

%

Romanian leu 4.5635 4.5616 -0.04% -0.62% Croatian 7.4065 7.4065 +0.00 2.01% kuna % Serbian 119.44 119.70 +0.22 3.27% dinar 00 00 % Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 1014.4 1010.5 +0.38 +10.0 2 9 % 7% Budapest 36238. 36041. +0.55 +13.2 23 13 % 3% Warsaw 2363.5 2366.0 -0.11% +21.3 2 6 4% Bucharest 8339.0 8299.2 +0.48 +17.7 4 2 % 0% Ljubljana 807.19 809.85 -0.33% +12.4

9%

Zagreb 1885.2 1886.1 -0.05% -5.49% 7 3 Belgrade 718.22 707.17 +1.56 +0.12 % % Sofia 719.96 715.14 +0.67 +22.7 % 7%

BONDS

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

Republic

2-year 0 0 +067b -2bps

ps

5-year 0.083 0.048 +030b +4bps

ps

10-year 0.898 0 +041b +0bps

ps Poland

2-year 1.821 0.007 +249b -2bps

ps

5-year 2.697 0.013 +291b +0bps

ps

10-year 3.364 0.006 +288b +1bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.57 0.67 0.77 0

IBOR=>

Hungary <BU 0.23 0.31 0.38 0.15

BOR=>

Poland <WI 1.79 1.825 1.88 1.73

BOR=>

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

(Additional reporting by Bartosz Chmielewski in Warsaw; Editing