* 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
* Romania cuts 5-year bond auction
(Adds Romanian bond auction, cancelled Czech auctions)
By Sandor Peto
BUDAPEST, Dec 12 Romania's leu eased on Monday
while Bucharest stocks rose after the leftist Social Democrats
(PSD) won a parliamentary election on Sunday.
The PSD won about 46 percent of the vote, which could allow
them to form a stable government, but its loose fiscal policy
proposals have fuelled worries among investors.
The leu slipped 0.1 percent to 4.5055 against the
euro by 1530 GMT, staying within the range near 4.5 of the last
two months, while other Central European currencies were mixed.
The Bucharest stock index rose 0.8 percent. Warsaw's
blue-chip index continued to retreat from Thursday's
7-1/2-month peak, shedding 0.8 percent.
Analysts said investor attention would now turn to the new
Romanian 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," Erste analysts said in a
The Social Democrats, who were driven from office a year ago
by protesters angry at corruption and abuse of power, have
advocated a programme which boosts wages and curbs value-added
PSD's strong win averts the threat of difficult coalition
talks to form a government.
"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.
Government bond yields were flat or rose slightly across the
region ahead of an expected U.S. interest rate rise on Wednesday
that would make emerging market assets relatively less
Romania cut its offer at an auction of five-year government
bonds, selling the debt at a yield of 2.47 percent.
Government budgets have been performing better than expected
in the region. The Czechs even cancelled this year's last bond
auction and a 39-week Treasury bill sale.
Hungary's parliament passed a law on Monday to cut corporate
taxes next year.
CEE MARKETS SNAPSHOT AT 1630 CET
Latest Previous Daily Change
bid close change in 2016
Czech 27.0200 27.0395 +0.07% -0.08%
Hungary 314.2000 314.7300 +0.17% 0.14%
Polish 4.4600 4.4544 -0.13% -4.53%
Romanian 4.5055 4.5017 -0.08% 0.30%
Croatian 7.5330 7.5322 -0.01% 1.41%
Serbian 123.5000 123.3600 -0.11% -1.64%
Note: calculated previous close at 1800
daily from CET
Latest Previous Daily Change
close change in 2016
Prague 905.43 900.71 +0.52% -5.32%
Budapest 30535.63 30588.38 -0.17% +27.65
Warsaw 1884.71 1899.76 -0.79% +1.37%
Buchares 6951.39 6894.98 +0.82% -0.76%
Ljubljan 703.55 705.46 -0.27% +1.06%
Zagreb 1985.90 1982.98 +0.15% +17.53
Belgrade 722.43 719.52 +0.40% +12.16
Sofia 582.70 581.48 +0.21% +26.43
Yield Yield Spread Daily
(bid) change vs Bund change
2-year -0.766 -0.052 -003bps -7bps
5-year -0.118 0.022 +030bp +0bps
0.571 0.007 +017bp -4bps
2-year 1.947 0 +269bp -1bps
5-year 2.901 0.03 +332bp +1bps
3.644 0.026 +324bp -2bps
FORWARD RATE AGREEMENT
3x6 6x9 9x12 3M
Czech <PRI 0.27 0.24 0.23 0
Hungary <BUB 0.36 0.39 0.48 0.39
Poland <WIB 1.755 1.77 1.82 1.73
Note: are for ask
(Reporting by Sandor Peto; Editing by Catherine Evans)