BUDAPEST: Hungarian government bonds rose on Tuesday as the central bank reaffirmed its dovish message after its meeting, saying it was ready to ease policy further if warranted by inflation trends.
Central European monetary policymakers have mostly maintained their dovish stance since figures over recent weeks showed a pick-up in economic growth in the region in the first quarter and lower-than-expected inflation rates in April.
Hungary's central bank, regarded as the most dovish in the region, is not expected to hike rates until 2019, according to a Reuters poll conducted last week. The previous poll in April gave an estimate of 2018.
The bank kept rates on hold as expected, adding it was ready to ease policy further, using unconventional tools, if needed.
Hungarian government bond prices extended their gains. Yields dropped by 2-4 basis points along the curve, with 10-year paper trading at 3.08 percent, while Poland's yields rose slightly or were flat.
"We can expect a strong bond auction on Thursday," one Budapest-based trader said.
The forint was flat at 308.4 against the euro at 1343 GMT, recovering after weakening early, while Central European currencies were mixed, with the zloty easing 0.1 percent.
One dealer said the forint's rebound was probably caused by a temporary forint shortage after May's personal income tax payments, which boosted overnight interbank rates to 0.3-0.4 percent from about 0.1 percent.
"That will change tomorrow when the money from yesterday's (central bank) swap auctions reaches the market," the dealer added.
Elsewhere in Central Europe, the Czech crown firmed 0.3 percent to 26.47 against the euro.
The Czech central bank is the only one in the region to have signalled that a hike in its ultralow interest rates may be near, having removed a cap on the crown in early April that had kept it on the weak side of 27 against the euro for more than three years.
Record low interest rates are boosting Czech housing prices and the central bank needs to start slowing price spiral and demand for mortgages, rate-setter Vojtech Benda said in an interview at the Reuters Central & Eastern Europe Investment Summit.
Regional stock markets were mostly in the red after a rally in the past week.
But shares in Hungarian drug maker Richter traded near record highs, still buoyed by last week's news that the EU Medicines Agency recommended approval of its Cariprazine drug for bipolar mania and schizophrenia.
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