* Leu eases, election winner PSD may keep fiscal policy
* Romanian stocks outperform, bonds seen facing political
* CEE bonds ease as Fed is seen lifting rates
By Sandor Peto
BUDAPEST, Dec 12 Romania's leu eased while other
Central European currencies firmed on Monday while Bucharest
stocks rose after the leftist Social Democrats (PSD) won a
parliamentary election there on Sunday.
The PSD won about 46 percent of the vote, which could allow
them to form a stable government, but the party's loose fiscal
policy proposals have fuelled worries among investors.
The leu slipped 0.1 percent to 4.5065 against the
euro, staying within the range near 4.5 of the last two months.
Hungary's forint firmed 0.2 percent and the Polish
zloty was steady.
The Bucharest stock index rose 0.6 percent. Budapest
and Prague were rangebound and Warsaw's bluechip
index continued to retreat from Thursday's
7-and-1/2-month peak, shedding 0.8 percent.
Analysts said investor attention would now turn to the new
government's budget plans and whether it will tighten fiscal
policy to stop the budget deficit breaching the European Union
ceiling of 3 percent of economic output.
"Markets might give the new government some time to come up
with fiscal countermeasures for 2017. Without fiscal tightening,
there is a large risk of a deficit overrun next year," Erste
analysts said in a note.
The winning Social Democrats had advocated a wage hike and
value-added tax cut programme in the run-up to the election.
On the positive side, PSD's strong win averts the threat of
difficult coalition talks to form a government, analysts said.
"Now it would be easy for PSD to form a (parliament)
majority," Raiffeisen analysts said in a note.
Analysts said PSD's plans to further reduce taxes and social
contributions and to substantially increase public sector wages
and social transfers could push up Romanian government bond
yields, making Hungarian bonds relatively more attractive.
But the leu, which is managed by the central bank, was seen
as unlikely to become very volatile.
A Reuters poll of analysts indicated last week that the
central bank was unlikely to react quickly to a fiscal
loosening, but by late 2017 it may become the first of the
region's main central banks to hike rates.
Romanian bonds moved little early on Monday, while Poland's
and Hungary's 10-year yields rose 4-5 basis points, lifted by
expectations for an interest rate hike by the Federal Reserve on
Romania's November annual inflation dipped further into
negative territory despite recent wage rises, to -0.7 percent.
CEE SNAPSHOT AT 1034 CET
Latest Previous Daily Change
bid close change in 2016
Czech 27.0260 27.0395 +0.05% -0.10%
Hungary 314.1000 314.7300 +0.20% 0.17%
Polish 4.4545 4.4544 +0.00% -4.41%
Romanian 4.5065 4.5017 -0.11% 0.28%
Croatian 7.5310 7.5322 +0.02% 1.43%
Serbian 123.4400 123.3600 -0.06% -1.60%
Note: calculate previous close at 1800 CET
daily d from
Latest Previous Daily Change
close change in 2016
Prague 903.31 900.71 +0.29% -5.54%
Budapest 30503.82 30588.38 -0.28% +27.52
Warsaw 1885.07 1899.76 -0.77% +1.39%
Buchares 6935.76 6894.98 +0.59% -0.98%
Ljubljan 706.05 705.46 +0.08% +1.42%
Zagreb 1986.85 1982.98 +0.20% +17.59
Belgrade <.BELEX15 722.74 719.52 +0.45% +12.21
Sofia 584.19 581.48 +0.47% +26.75
Yield Yield Spread Daily
(bid) change vs Bund change
2-year <CZ2YT=RR -0.766 -0.052 -002bps -6bps
5-year <CZ5YT=RR -0.118 0.022 +031bps +1bps
<CZ10YT=R 0.584 0.02 +020bps -1bps
2-year <PL2YT=RR 1.987 0 +273bps -1bps
5-year <PL5YT=RR 2.915 0.046 +334bps +3bps
<PL10YT=R 3.658 0 +327bps -3bps
FORWARD RATE AGREEMENT
3x6 6x9 9x12 3M
Czech < 0.27 0.24 0.23 0
Hungary < 0.37 0.41 0.5 0.4
Poland < 1.755 1.775 1.805 1.73
Note: are for
(Reporting by Sandor Peto; Editing by Catherine Evans)