CEE MARKETS-Interbank rates jump stabilises leu, forint at 7-month high vs zloty

    * Leu drifts further off record lows as ROBOR rates surge
    * Forint sets 7-month high vs zloty
    * Hungarian central bank may signal cut in its fx swaps

    By Sandor Peto
    BUDAPEST, Jan 28 (Reuters) - The leu bucked a
weakening of Central European currencies on Monday, drifting
further off record lows as interbank interest rates jumped.
    Bucharest's overnight interbank interest rate
started the new reserve period of banks at bids at 3.24 percent
on Friday, jumping from 1.52 percent after Thursday's holiday in
Romania, and stayed steady on Monday.
    Those "abnormally high" levels give some respite to the leu
, but the government may need to cut its 400 million
leu offer in a 2031-expiry bond on Monday, after a 12-14 basis-
point jump in bond yields on Friday, ING analysts said.
    "This amount was not easy to sell even in better times. We
expect some partial allocation towards the higher end of the
secondary market," they said in a note.
    The tighter interbank rates cut pressure on the Romanian
central bank (NBR) to intervene in currency markets to defend
the leu which set record lows at 4.7985 last week, beyond 4.7
which some investors earlier thought was the bank's tolerance
level.
    Romania reported on Monday a budget deficit of 2.9 percent
of economic output for 2018.
    The figure is below the European Union's 3 percent tolerance
level, but is unlikely to soothe worries over a widening in
Romania's twin fiscal and current account deficits.
    Romanian assets have plunged in the past month because the
government launched taxes on banks and energy firms, causing
concern over a business environment and, by linking the bank tax
to interbank interest rate, confusion over monetary policy.
    The region's main currencies eased slightly, reflecting
concern over Europe's economic growth, even though the European
Union's eastern economies grow faster than western peers.
    With the zloty shedding 0.2 percent and the forint
 only 0.1 percent versus the euro, the Hungarian unit
set its strongest rate in almost seven months against the Polish
unit.
    Their exchange rate reflects diverging monetary policy
expectations.
    Poland's inflation has stayed below the central bank's
target range, 1.5-3.5 percent, and the bank may keep interest
rates on hold for years.
    Expectations for Hungarian interest rates had been similar
until last year, but the Hungarian central bank has gradually
shifted towards more hawkish rhetoric. 
    Its Deputy Governor Marton Nagy said two weeks ago the bank
could start to tighten policy if core inflation reached or
exceeded 3 percent.
    The bank is expected to keep interest rates on hold at its
meeting on Tuesday, but some analysts expect it to signal a
tightening in the liquidity it provides through its fx swaps.
 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1021 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7000   25.6890    -0.04%    +0.03%
 crown      >                                       
 Hungary    <EURHUF=  317.7900  317.5000    -0.09%    +1.04%
 forint     >                                       
 Polish     <EURPLN=    4.2950    4.2870    -0.19%    -0.13%
 zloty      >                                       
 Romanian   <EURRON=    4.7650    4.7669    +0.04%    -2.33%
 leu        >                                       
 Croatian   <EURHRK=    7.4260    7.4290    +0.04%    -0.22%
 kuna       >                                       
 Serbian    <EURRSD=  118.3500  118.4650    +0.10%    -0.04%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1026.61  1023.100    +0.34%    +4.06%
                                       0            
 Budapest             41027.07  40944.82    +0.20%    +4.82%
 Warsaw                2382.21   2398.74    -0.69%    +4.64%
 Bucharest             7053.08   7053.67    -0.01%    -4.48%
 Ljubljana  <.SBITOP    837.44    833.51    +0.47%    +4.13%
            >                                       
 Zagreb                1759.89   1762.22    -0.13%    +0.63%
 Belgrade   <.BELEX1    699.69    699.70    -0.00%    -8.14%
            5>                                      
 Sofia                  573.34    573.33    +0.00%    -3.55%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7400    0.0030   +233bps     +1bps
            R>                                      
   5-year   <CZ5YT=R    1.6680   -0.0150   +200bps     -1bps
            R>                                      
   10-year  <CZ10YT=    1.8550    0.0210   +166bps     +2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.3830    0.0010   +197bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.2130    0.0050   +254bps     +1bps
            R>                                      
   10-year  <PL10YT=    2.8120   -0.0020   +261bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.07      2.11      2.12      2.00
            <PRIBOR=                                
            >                                       
 Hungary                  0.30      0.55      0.81      0.14
                                                    
 Poland                   1.74      1.73      1.73      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 (Additional reporting by Radu Marinas in Bucharest, editing by
Ed Osmond)
  
 
 

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