Term Structures Have Flattened in The CEE Region

• While the short end of the Hungary and Czech curves has been rising as central banks have started a tightening cycle last month, LT rates have been falling as the uncertainty has been increasing (Delta variant, falling Chinese liquidity..).
• Hungary term structure has shifted entirely to the upside with the move on the short end (1 to 5Y) bigger than the long end.
• In the past month, Czech ST yields (up to 5Y) have been rising while LT yields (> 5Y) have been falling; the 10Y is down 20bps to 1.74%.
• On the other hand, Poland ST yields (up to 1Y) are flat as the majority of the NBP board aims to keep financial conditions as loose as possible to stimulate the economic recovery. The belly of the curve has experienced the biggest move in the past month, with the 5Y yield up 35bps to 1.16%. The 1Y20Y yield curve is slightly flatter.
• The quiet NBP could continue to weigh on the PLN in the short to medium term with traders chasing HUF/CZK amid rising monetary policy divergence.

Source: Bloomberg/MNI