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CEE MARKETS-Romanian yields set multi-year highs after inflation jump

* Romania's inflation surges to 2.6 pct, leu at new 5-yr low

* Romanian government bond yields highest since 2014

* CEE GDP data due Tuesday seen showing robust growth

(Recasts with surge in Romanian bond yields, renewed leu weakening) BUDAPEST/BUCHAREST, Nov 10 (Reuters) - Romanian government bond yields rose to their highest levels in more than three years on Friday after data showed Romanian inflation rose faster in October than analysts had expected. Adding to signs of overheating in the Romanian economy, the country's inflation has been rapidly catching up with a rebound across Central Europe since mid-2016. Annual inflation ran at 2.6 percent in October, compared with 1.8 percent in September and 1.2 percent in August, fueling expectations the central bank will have to tighten policy.

Romanian assets stood out in otherwise subdued CEE markets ahead of GDP data next week from the region's biggest economies. The yield on Romania's 10-year bonds rose 5 basis points to 4.48 percent, according to Reuters data. The leu initially rebounded from five-year lows after the data. But some investors later decided to cover euro selling positions ahead of the weekend, one Bucharest-based dealer said, knocking the leu to its weakest level in more than five years. At 1353 GMT, it traded at 4.655 against the euro, down by a quarter of a percent. It plunged through 4.6 earlier this week, after the Romanian central bank said that in future it would focus on keeping interest rates near its benchmark rate and be more flexible over the exchange rate. That policy will face a test later this year when government spending is expected to surge, increasing inflation pressures. Some investors believe that the leu has reached the bottom, others see further weakening. "After this week's steep falls it may only edge down," one Bucharest dealer said. Governor Mugur Isarescu said that the leu's weakness reflected a widening of the trade deficit, but the currency was "relatively close" to its equilibrium levels. Focus is turning to next Tuesday when the region's biggest economies are due to release third-quarter economic output figures, which are expected to show continuing robust growth. Romania's data could highlight overheating pressure in its economy. Hungary's figures are unlikely to deter its central bank from its dovish policy. It is widely expected to announce new easing measures at its Nov. 21 meeting to push long-term yields down. Hungary's debt yield curve is already below U.S. Treasuries levels up to the 10-year maturity. Hungarian yields edged up slightly on Friday, tracking yield gains across Europe amid a sell-off in German Bunds.

CEE MARKETS SNAPSH AT 1453 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 25.551 25.542 -0.03% 5.70% 0 5 Hungary 312.06 311.66 -0.13% -1.04% forint 00 00 Polish zloty 4.2296 4.2324 +0.07 4.12%

%

Romanian leu 4.6550 4.6445 -0.23% -2.58% Croatian 7.5450 7.5375 -0.10% 0.13%

kuna

Serbian 118.43 118.67 +0.20 4.15% 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 1066.5 1060.5 +0.57 +15.7 9 3 % 3% Budapest 39864. 40273. -1.02% +24.5 21 66 6% Warsaw 2473.4 2478.2 -0.19% +26.9 8 1 8% Bucharest 7764.5 7746.9 +0.23 +9.59 3 9 % % Ljubljana 792.00 788.58 +0.43 +10.3 % 7% Zagreb 1859.5 1848.4 +0.60 -6.78% 8 7 % Belgrade 738.64 734.99 +0.50 +2.96 % % Sofia 670.88 671.73 -0.13% +14.4

0% BONDS

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

Republic

2-year 0.461 0.125 +121b +12bp ps s 5-year 0.73 -0.01 +107b -1bps

ps

10-year 1.674 0.075 +128b +6bps

ps Poland

2-year 1.599 -0.006 +235b -1bps

ps

5-year 2.598 -0.04 +294b -4bps

ps

10-year 3.41 -0.008 +301b -2bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.97 1 1.22 0

IBOR=>

Hungary <BU 0.09 0.09 0.14 0.03

BOR=>

Poland <WI 1.775 1.8075 1.89 1.73

BOR=>

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

(Additional reporting by Radu Marinas in Bucharest; editing by Emelia Sithole-Matarise)