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CEE MARKETS-Czech crown gains; central banker says room for rate rise

Sandor Peto and Jason Hovet

* Crown gains as rate-setter Benda sees room for rate increase

* Loose Fed, euro zone growth concern blurs CEE rate outlook

* Hungarian rates jump on retail bond sale success

BUDAPEST/PRAGUE, June 13 (Reuters) - The crown gained on Thursday after a Czech central bank board member said he still saw room to raise interest rates. Other Central European currencies fell. The remarks by Czech policy-maker Vojtech Benda came in a Bloomberg interview that followed similarly hawkish comments made the governor of the central bank, Jiri Rusnok, on Tuesday.

The outlook for Central European interest rates is unclear. The Federal Reserve is expected to cut rates soon and the European Central Bank might eventually follow suit. Central Europe's economies are linked with both regions, especially the euro zone. But surging wages are fueling inflation in Central Europe, putting pressure on its central banks to raise rates. The uncertainty over rates is the most visible in the Czech Republic, where forward rate agreements price in rate cuts, after eight rate increases since 2017. The crown rose to 25.58 versus the euro by 0844 GMT. The forint and the zloty each fell 0.1%. The leu continued to fall from five-month highs, trading at 4.7245 versus the euro, after April figures showed weak annual growth in industrial output and a widening in the current account deficit in Romania. The central bank is widely expected to fight inflation by tightening liquidity in leu markets, but some analysts said after Tuesday's higher-than-expected inflation data that the bank may discuss a rate increase. In Hungary, the successful introduction of a new retail government bond reduced forint liquidity, casting doubt on the need of a further cut in the central bank's liquidity-creating FX swaps at its meeting on June 25. The overnight BUBOR interbank interest rate has quadrupled since last week, to 0.24 percent, rising above longer maturities. Depressed Bund and U.S. Treasury yields, coupled with the strong retail bond sales, can help Hungary's debt agency AKK to lengthen the average maturity of its outstanding debt, traders said. Government bond yields were mostly flat in the region. Hungary's 10-year bond traded around 2.8%.

CEE SNAPSHOT ATMARKETS 1044 CET

CURRENCI ES

Latest Previous Daily Changebid close change in 2019Czech <EURCZK= 25.5800 25.5820 +0.01% +0.50%crown >Hungary <EURHUF= 322.2500 322.0000 -0.08% -0.36%forint >Polish <EURPLN= 4.2605 4.2580 -0.06% +0.68%zloty >Romanian <EURRON= 4.7245 4.7235 -0.02% -1.49%leu >Croatian <EURHRK= 7.4170 7.4115 -0.07% -0.09%kuna >Serbian <EURRSD= 117.9800 118.0100 +0.03% +0.27%dinar >Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2019Prague 1054.36 1051.990 +0.23% +6.87%

0

Budapest 40764.97 40592.32 +0.43% +4.15%Warsaw 2286.98 2282.80 +0.18% +0.45%Bucharest 8577.98 8591.06 -0.15% +16.17%Ljubljana <.SBITOP 872.22 870.54 +0.19% +8.45%>Zagreb 1912.50 1912.85 -0.02% +9.36%Belgrade <.BELEX1 731.91 731.10 +0.11% -3.91%

5>

Sofia 577.17 578.63 -0.25% -2.91%

BONDS

Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 1.6860 0.0790 +235bps +8bps

R>

5-year <CZ5YT=R 1.5020 -0.0230 +210bps -2bps

R>

10-year <CZ10YT= 1.6230 0.0120 +187bps +2bps

RR> Poland

2-year <PL2YT=R 1.6380 -0.0260 +231bps -2bps

R>

5-year <PL5YT=R 2.0120 -0.0140 +261bps -1bps

R>

10-year <PL10YT= 2.5000 -0.0020 +275bps +1bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 2.15 2.05 1.96 2.17

<PRIBOR=

>

Hungary 0.29 0.44 0.57 0.18Poland 1.75 1.72 1.71 1.72

Note: FRA are for ask prices quotes

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(Additional reporting by Radu Marinas in Bucharest, editing by Larry King)