October 7, 2016 / 10:41 AM / 9 months ago

CEE MARKETS-Leu slides on mortgages bill, forint surges

7 Min Read

* Leu hits three-month low on bill to convert franc
mortgages
    * Forint touches 17-month high, August economic data strong
    * Czech central bank reserves continue to surge on cap
speculation

 (Adds new tools of Hungarian central bank, U.S. data, new
comments and background)
    By Sandor Peto and Radu-Sorin Marinas
    BUDAPEST/BUCHAREST, Oct 7 (Reuters) - The leu weakened on
Friday as Romania prepared to vote on a plan to convert Swiss
franc mortgages to the domestic currency, while industrial
output data fuelled optimism over Central European economies.
    Romanian lawmakers are expected to pass a bill on Monday
that will allow mortgage holders to convert their loans to leu.
Concern over the cost to banks has hurt the leu as the vote
approaches, and the currency had shed 0.8 percent to 4.513
versus the euro by 1354 GMT. 
    Standard & Poor's is unlikely to improve Romania's rating
later on Friday as the country's Dec. 11 elections make the
outlook uncertain, ING analysts said in a note.
    In contrast with the leu, the forint surged
against the euro, touching its strongest levels since May 2015.
Trading at 304.30 it was firmer by 0.1 percent from Thursday.
    It has gained every day this week, crossing stop-loss and
options barriers, partly on hopes that Moody's will follow the
example of S&P, which upgraded Hungary's credit rating to
investment grade last month.
    Hungary's central bank announced new tools on Friday to help
fine-tune market liquidity. 
    Earlier it limited its 3-month deposits as of late this
month, to squeeze out funds from the facility into markets, and
its measures could weaken the forint, Societe Generale analysts
said in a note.
    The leu sell-off is overdone, therefore investors should buy
the leu, selling the forint, they added.    
    Healthy August Czech and Hungarian industrial output growth
and trade surplus figures helped underpin regional currencies.
    Government bonds eased ahead of U.S. jobs data. U.S.
employment growth unexpectedly slowed, curbing expectations for
Federal Reserve rate hikes which would draw cash away from
Central European markets.
    Polish 10-year bonds rebounded. Their yield, at 3.02 percent
was a tad higher from Thursday, but off Thursday's high of 3.08
percent.
    The Czech central bank reported an increase of almost 3
billion euros in foreign currency reserves in September to 73.39
billion euros. Reserves have more than doubled since it
introduced a cap on the crown in 2013 that keeps it weaker than
27 to the euro.
    The crown's rate against the euro implied in six-month
forwards firmed a touch to 26.894, stronger than
the central bank's limit. The bank has said its policy will not
end before the second quarter of 2017, but speculation that it
might has forced it to buy billions of euros in the past months.
    
           CEE      SNAP   AT  1522       
           MARKETS  SHOT  CET         
                    CURRENCIES            
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                    bid   clos  chan  in
                          e     ge    2016
 Czech     <EURCZK  27.0  27.0   +0.  -0.0
 crown     =>        220   245   01%    9%
 Hungary   <EURHUF  304.  304.   +0.  3.40
 forint    =>       3000  6700   12%     %
 Polish    <EURPLN  4.28  4.28   +0.  -0.5
 zloty     =>         03    49   11%    2%
 Romanian  <EURRON  4.50  4.47  -0.7  0.22
 leu       =>         90    63    3%     %
 Croatian  <EURHRK  7.50  7.51   +0.  1.79
 kuna      =>         50    05   07%     %
 Serbian   <EURRSD  123.  123.   +0.  -1.3
 dinar     =>       0700  2300   13%    0%
 Note:     calcula  prev  clos  1800      
 daily     ted      ious  e at  CET   
 change    from                       
                    STOC                  
                    KS                
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                          clos  chan  in
                          e     ge    2016
 Prague             888.  889.  -0.1  -7.0
                      49    38    0%    9%
 Budapest           2846  2839   +0.   +18
                    3.83  9.59   23%  .99%
 Warsaw    <.WIG20  1759  1761  -0.1  -5.3
           >         .65   .90    3%    5%
 Buchares           6934  6944  -0.1  -1.0
 t                   .59   .44    4%    0%
 Ljubljan  <.SBITO  737.  738.  -0.1   +5.
 a         P>         38    72    8%   92%
 Zagreb    <.CRBEX  1983  1969   +0.   +17
           >         .35   .60   70%  .38%
 Belgrade  <.BELEX  639.  642.  -0.3  -0.6
           15>        91    24    6%    5%
 Sofia     <.SOFIX  507.  509.  -0.2   +10
           >          91    29    7%  .20%
                    BOND                  
                    S                 
                    Yiel  Yiel  Spre  Dail
                    d     d     ad    y
                    (bid  chan  vs    chan
                    )     ge    Bund  ge
                                      in
 Czech                                spre
 Republic                             ad
   2-year  <CZ2YT=  -0.5  -0.0   +01  -1bp
           RR>        66    07  0bps     s
   5-year  <CZ5YT=  -0.1  -0.0   +03  -1bp
           RR>        58    02  4bps     s
           <CZ10YT  0.30     0   +03  -1bp
 10-year   =RR>        9        0bps     s
 Poland                                   
   2-year  <PL2YT=  1.77  0.00   +24   +0b
           RR>         8     7  4bps    ps
   5-year  <PL5YT=  2.47  0.06   +29   +6b
           RR>         1     4  7bps    ps
           <PL10YT  3.04  0.02   +30   +1b
 10-year   =RR>        6     6  4bps    ps
           FORWARD  RATE  AGREEMENT       
                    3x6   6x9   9x12  3M
                                      inte
                                      rban
                                      k
 Czech     <CZKFRA  0.28  0.24  0.22     0
 Rep       ><PRIBO                    
           R=>                        
 Hungary   <HUFFRA  0.76  0.75  0.79  0.87
           ><BUBOR                    
           =>                         
 Poland    <PLNFRA  1.74  1.73  1.72  1.71
           ><WIBOR                 5  
           =>                         
 Note:     are for                        
 FRA       ask                        
 quotes    prices                     
 *****************************************
 *********************
    

 (Reporting by Sandor Peto, editing by Larry King)

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