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CEE MARKETS-Robust output fails to support forint, Serbian rates seen on hold

Sandor Peto and Aleksandar Vasovic

* Forint eases though Hungary's industrial output surges

* Hungarian CPI data due on Thursday seen showing further rise

* Serbian central bank meets, seen keeping rates on hold

BUDAPEST/BELGRADE, May 8 (Reuters) - Hungary's forint edged towards 5-month lows on Wednesday as robust industrial output data did not change market expectations that the central bank (NBH) will not rush into further monetary tightening despite a continued rise in inflation. The forint eased 0.1 percent to 324.4 against the euro by 0815 GMT, approaching its weakest levels since November, set at 324.85 last week. Hungarian government bond yields rose by 1-2 basis points, with the 10-year paper trading at 3.33 percent. April data due on Thursday are expected to show a rise in the annual inflation to around 4 percent, the top of the NBH's 2-4 percent target range. The forint weakened almost 4 percent in the past seven weeks as the NBH increased its overnight deposit rate slightly at its March meeting but dropped its guidance for gradual monetary tightening. Surging wages have been boosting domestic demand in Central Europe, fuelling a rise in consumer prices, but an economic slowdown and persistent low interest rates in the euro zone have dampened inflation pressure. Data released by Hungary on Wednesday showed that industrial output surged by an annual 8 percent in March, exceeding all forecasts. Analysts attributed the jump to a pick-up in the auto industry, after wage strikes at the local plants of companies including Audi cut production early this year. The figures herald economic growth of around 5 percent this year, ING analyst Peter Virovacz said in a note. "The big question, however, is when the reappearing bogey of trade war and the weakness of Germany's industry will have an impact," he said, adding that Hungary's industry could grow by about 6 percent this year. The U.S.-China trade war has been weighing on mood in emerging markets. The region's blooming vehicle industry, a key driver of growth, could get a hit if Washington introduces tariffs on car imports from Europe. Germany also released better-than-expected March industrial output data on Wednesday, but the outlook remained gloomy.

The data and some rebound in the euro did not provide support for the forint, but the zloty firmed a shade to 4.289. Elsewhere, the dinar firmed slightly ahead of the Serbian central bank's meeting where it is expected to keep its benchmark rate on hold as inflation remains well within its target despite robust economic growth. The bank has been buying the dinar in the market this year to stem its strengthening, partly driven by domestic spending by Serbians who work abroad. "Also there were several issuances of dinar-indexed T-bonds which boosted demand," one dealer said, adding that the currency could weaken to around 118.5 soon.

CEE SNAPSHOT ATMARKETS 1015 CET

CURRENCI ES

Latest Previous Daily Changebid close change in 2019Czech <EURCZK= 0.0000 25.7410 #DIV/0! #DIV/0!crown >Hungary <EURHUF= 324.4000 324.1200 -0.09% -1.02%forint >Polish <EURPLN= 4.2890 4.2919 +0.07% +0.01%zloty >Romanian <EURRON= 4.7579 4.7565 -0.03% -2.18%leu >Croatian <EURHRK= 7.4070 7.4095 +0.03% +0.04%kuna >Serbian <EURRSD= 117.8900 117.9700 +0.07% +0.35%dinar >Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2019Prague 1063.50 1063.500 +0.00% +7.80%

0

Budapest 41273.50 41084.57 +0.46% +5.45%Warsaw 2239.89 2233.80 +0.27% -1.61%Bucharest 8407.66 8419.18 -0.14% +13.87%Ljubljana <.SBITOP 882.21 881.04 +0.13% +9.69%>Zagreb 1831.84 1838.28 -0.35% +4.75%Belgrade <.BELEX1 737.89 736.38 +0.21% -3.12%

5>

Sofia 567.99 567.70 +0.05% -4.45%

BONDS

Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 1.6070 -0.1710 +221bps -18bps

R>

5-year <CZ5YT=R 1.7400 -0.0020 +219bps -2bps

R>

10-year <CZ10YT= 1.8660 -0.0010 +189bps -1bps

RR> Poland

2-year <PL2YT=R 1.6850 0.0100 +229bps +0bps

R>

5-year <PL5YT=R 2.3290 0.0050 +277bps -1bps

R>

10-year <PL10YT= 2.9740 -0.0110 +300bps -2bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 2.25 2.26 2.26 2.21

<PRIBOR

>

Hungary 0.37 0.53 0.70 0.16Poland 1.75 1.76 1.78 1.72

Note: FRA are for ask prices quotes

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(Reporting by Sandor Peto; Editing by Andrew Cawthorne)