Band Kristina Than

BUDAPEST, June 28 (Reuters) – the forint EURHUF= rallied on Tuesday as government bond yields edged higher ahead of a Hungarian central bank meeting where interest rates are expected to be raised further in a bid to curb soaring inflation.

The forint hit a record low of 404.50 against the euro on Monday, decoupling from its Central European peers and falling around 8% this year, as investors increasingly worry about a delay in talks between Hungary and Brussels on the release of billions of euros. EU recovery funds.

Other factors, such as Hungary’s high budget deficit, the relatively high level of public debt in the region, and the government’s recent decision to impose heavy windfall taxes on banks and a set of companies, also weighed on investor confidence.

On Tuesday, the forint gained 0.7% to 400 against the euro.

“The biggest risk is the ongoing debate on European funds, that’s what has been assessed in this uncertainty,” said a bond trader in Budapest, adding that Hungary’s risk profile had deteriorated by relation to Poland.

Hungary’s 10-year government bond yield rose about 3-4 basis points to 8.34% on Tuesday after jumping about 40 basis points on Monday according to the agency’s page. HUBONDFIX debt. The Polish 10-year bond was trading at 7.4%, up 10 basis points, extending its rise from Monday.

Traders said Hungarian and Polish bonds were showing high volatility and yields were now rising after a big rally last week, following core market returns.

“The Polish debt market is booming (…). Two weeks ago (the yield on 10-year Treasury bills) was above 8%, last week it fell to 6.9% , so the volatility is huge,” said Mateusz Sutowicz, a financial market analyst at Bank Millennium said.

“Volatility remains elevated … due to changing expectations for the target level of interest rates in Poland, and these are influenced by fears of a global recession.”

Hungarian central bank policymakers are expected to stick to a 50bp pace of tightening on Tuesday, but some analysts in a Reuters poll have forecast a bigger increase in the base rate to 5.9% .

“A 50 basis point rise will not support the markets,” said a Hungarian fixed-income trader, adding that if the bank opted for a lower rise, the forint would weaken further.

“Significant forint weakening may require a larger (base) rate hike, with a 100 basis point move realistic,” brokerage firm Equilor said in a note. He added that the effective rate – the one-week deposit rate – was currently at 7.25% and could rise further on Thursday.

Elsewhere in central Europe, the Czech crown EURCZK= was flat while the Polish zloty EURPLN= was also stable.

CEE MARKETS

INSTANTANEOUS

At 09:38 CET

CURRENCIES

Last

Previous

Daily

To change

offer

close

change

in 2022

EURCZK=

Czech koruna

EURCZK=

24.7350

24.7280

-0.03%

+0.55%

EURHUF=

Hungarian forint

EURHUF=

400.0500

402.7500

+0.67%

-7.66%

EURPLN=

polish zloty

EURPLN=

4.6855

4.6875

+0.04%

-2.02%

EURHRK=

Croatian kuna

EURHRK=

7.5280

7.5305

+0.03%

-0.14%

EURRSD=

Serbian dinar

EURRSD=

117.3800

117.5800

+0.17%

+0.17%

Note: daily change

calculated from

1800 CET

Last

Previous

Daily

To change

close

change

in 2022

.PX

prague

.PX

1284.08

1260.1100

+1.90%

#ASSESS!

.BUX

Budapest

.BUX

39673.46

39501.86

+0.43%

-21.78%

.WIG20

Warsaw

.WIG20

1737.23

1713.18

+1.40%

-23.37%

.BETI

Bucharest

.BETI

12578.94

12537.44

+0.33%

-3.69%

.SBITOP

Ljubljana

.SBITOP

1140.01

1133.45

+0.58%

-9.20%

.CRBEX

Zagreb

.CRBEX

2024.89

2029.17

-0.21%

-2.62%

.BELEX15

Belgrade

.BELEX15

836.43

836.43

+0.00%

+1.91%

.SOFIX

Sofia

.SOFIX

610.90

613.67

-0.45%

-3.90%

Yield

Yield

Spread

Daily

(offer)

change

vs. Bunds

to change

Czech Republic

spread

CZ2YT=RR

2 years

CZ2YT=RR

6.2650

0.0010

+529bps

-10bps

CZ5YT=RR

5 years

CZ5YT=RR

5.7500

-0.0060

+437 basis points

-10bps

CZ10YT=RR

10 years

CZ10YT=RR

5.2520

0.0000

+363bps

-8bps

Poland

PL2YT=RR

2 years

PL2YT=RR

8.0350

0.1400

+706 basis points

+4 base points

PL5YT=RR

5 years

PL5YT=RR

7.8390

0.1500

+646 basis points

+6 basis points

PL10YT=RR

10 years

PL10YT=RR

7.4900

0.1830

+586 basis points

+10 basis points

FORWARD

3×6

6×9

9×12

3M interbank

Czech Republic

CZKFRAPRIBOUR=

7.61

7.62

7.39

7.22

Hungary

OYSTERBUBOR=

9.64

10.14

10:15 a.m.

7.73

Poland

PLNFRAWIBOR=

8.18

8:40 am

8.38

7.00

Note: ENG Quotes

are for asking prices

************************************************** **** ***********

(Reporting by Krisztina Than, Additional reporting by Anna Wlodarczak-Semczuk. Editing by Carmel Crimmins)

((krisztina.than@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.