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CEE MARKETS-Currencies ease mildly with central banks seen holding fire

Marton Dunai

BUDAPEST, May 28 (Reuters) - Emerging European assets were little changed on Tuesday, with currencies close to multi-month lows and stocks treading water as investors eyed central bank policy, which for the time being mostly means no change in interest rates. Hungary's central bank is expected to keep its base interest rate on hold on Tuesday and for the rest of 2019, preferring to tackle rising inflation by letting interbank rates rise, a Reuters poll found last week. The National Bank of Hungary (NBH) expects a rise in inflation to ease soon, partly due to sluggish euro zone growth even as Hungary's own 5.3% expansion outpaced all of the European Union in the first quarter. The forint traded half a percent off 8-month lows set against the euro last week, while bonds tracked international trends with yields falling about 5 basis points across the curve, a dealer in Budapest said. He said investors did not expect much of a policy change at the NBH's meeting later on Tuesday, adding the situation was a unclear because while inflation was a factor and the forint was on the weak side, the bank continued pumping liquidity into the economy using its FX swap tenders. "Maybe once we touch 330 (EUR/HUF) they will consider tightening for real, but right now it is difficult to communicate a tightening bias," he said. Czech markets were also treading water after central banker Tomas Holub signaled on Monday that there was no need to change interest rates in coming months and that the next move could be in either direction. Forward rate markets showed investors saw a chance of an interest rate cut within a year, after eight rate hikes since 2017, the last coming at the start of May. The crown was stuck at a 3-1/2 month low. "Not even a wider rate differential (with the euro zone) is enough to for the crown to get to stronger levels and the currency is not even getting support from central bankers," CSOB wrote in a daily note.

CEE SNAPSHOT ATMARKETS 1025 CET

CURRENCI ES

Latest Previous Daily Changebid close change in 2019Czech 25.8380 25.8360 -0.01% -0.51%

crown

Hungary 326.2500 325.9700 -0.09% -1.58%

forint

Polish 4.2963 4.2899 -0.15% -0.16%

zloty

Romanian 4.7621 4.7595 -0.05% -2.27%

leu

Croatian 7.4200 7.4223 +0.03% -0.13%

kuna

Serbian 117.8000 118.0100 +0.18% +0.42%

dinar

Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2019Prague 1041.47 1040.290 +0.11% +5.57%

0

Budapest 40268.30 40207.91 +0.15% +2.89%Warsaw 2188.08 2189.66 -0.07% -3.89%Bucharest 8336.06 8242.22 +1.14% +12.90%Ljubljana 879.87 878.32 +0.18% +9.40%Zagreb 1866.78 1866.63 +0.01% +6.75%Belgrade <.BELEX15 731.66 731.38 +0.04% -3.94%>Sofia 569.16 572.37 -0.56% -4.26%

BONDS

Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=RR 1.7420 -0.0510 +239bps -4bps>5-year <CZ5YT=RR 1.6940 0.0350 +224bps +6bps>10-year <CZ10YT=R 1.7870 -0.0140 +194bps +2bps

R> Poland

2-year <PL2YT=RR 1.6530 -0.0300 +230bps -2bps>5-year <PL5YT=RR 2.1700 -0.0300 +272bps +0bps>10-year <PL10YT=R 2.7990 -0.0370 +295bps +0bps

R>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep < 2.19 2.14 2.10 2.19

PRIBOR=>

Hungary < 0.35 0.50 0.66 0.20

BUBOR=>

Poland < 1.75 1.75 1.76 1.72

WIBOR=> Note: FRA are for ask prices quotes

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(Reporting by Reuters buros; Editing by Kirsten Donovan)