December 13, 2016 / 11:01 AM / 7 months ago

CEE MARKETS-Bonds track rebound in euro zone debt, Romania lags behind

8 Min Read

* Bond yields retreat, post-election Romania a laggard
    * Retreat of crude helps bonds, Fed meeting comments awaited
    * Warsaw leads stock gains, led by Pekao bank 
    * Bucharest stocks hit two-month high

    By Sandor Peto
    BUDAPEST, Dec 13 (Reuters) - Central European government
bonds rebounded on Tuesday as crude oil prices offered relief to
debt markets, although Romanian bonds remained under pressure
after leftists won a parliamentary election on the weekend. 
    Long-dated bonds firmed more than short maturities,
flattening the yield curve somewhat after higher oil prices had
put the emphasis back on inflation in a week when the U.S.
Federal reserve is tipped to raise interet rates.
    Poland's 10-year bond yield dropped 5 basis points to 3.58
percent by 0928 GMT.
    Hungary's corresponding yield fell 4 basis points to 3.33
percent.
    The yield on Romania's 10-year bonds, however, rose 2 basis
points, bid at 3.63 percent. Short-dated Romanian yields also
rose by a few basis points and the leu eased 0.1
percent to 4.5075 against the euro.
    Romanian assets are likely to remain under pressure due to
investor concerns the Social Democrat Party (PSD), which won
Sunday's election, will hike wages and cut taxes, and send the
budget deficit above the European Union's ceiling next year. 
    "We reiterate our relative value trade recommendation to
prefer Hungarian versus Romanian longer-term debt instruments,"
Raiffeisen analyst Stephan Imre said in a note.
    In focus this week is the Federal Reserve's two-day meeting
that will end on Wednesday.
    "The expectation is a rate hike, and the real question is
how hawkish the Fed's comments will become," one Budapest-based
fixed income trader said.
    Higher U.S. interest rates make assets in emerging markets
including Central Europe relatively less attractive and a
firming of the dollar often has the same effect.
    Regional equities rose and Warsaw's index 
outperformed. It gained 1.1 percent, driven by financial sector
stocks, mainly Pekao bank which firmed 1.5 percent.
    Sentiment towards bank stocks in Europe improved in choppy
trading after Italy's largest bank, UniCredit,
unveiled plans to raise 13 billion euros to shore up its balance
sheet. 
    The plans include selling profitable foreign business
including its Polish unit Pekao.  
    Standard & Poor's raised the outlook on Pekao's long-term
credit ratings to stable from negative on Monday, reflecting a
similar change on Poland's sovereign rating outlook.
    Bucharest's main stock index, rising 0.4 percent,
hit a 2-month high.
    Analysts have said the Romanian bourse's prospects hinged on
whether the new government pursues plans to list minority stakes
in state-owned energy and transport firms.
           CEE      SNAPSHOT    AT  1028 CET           
           MARKETS                                
                    CURRENCIES                         
                    Latest     Previous   Daily   Chang
                                                  e
                    bid        close      change  in
                                                  2016
 Czech     <EURCZK    27.0200    27.0345   +0.05  -0.08
 crown     =>                                  %      %
 Hungary   <EURHUF   314.0400   314.3350   +0.09  0.19%
 forint    =>                                  %  
 Polish    <EURPLN     4.4505     4.4522   +0.04  -4.33
 zloty     =>                                  %      %
 Romanian  <EURRON     4.5075     4.5012  -0.14%  0.26%
 leu       =>                                     
 Croatian  <EURHRK     7.5270     7.5345   +0.10  1.49%
 kuna      =>                                  %  
 Serbian   <EURRSD   123.2800   123.5200   +0.19  -1.47
 dinar     =>                                  %      %
 Note:     calcula  previous   close at   1800         
 daily     ted                            CET     
 change    from                                   
                    STOCKS                             
                    Latest     Previous   Daily   Chang
                                                  e
                               close      change  in
                                                  2016
 Prague                908.27     905.43   +0.31  -5.03
                                               %      %
 Budapest            30712.21   30613.15   +0.32   +28.
                                               %    39%
 Warsaw    <.WIG20    1903.01    1882.58   +1.09   +2.3
           >                                   %     6%
 Buchares             6978.57    6954.09   +0.35  -0.37
 t                                             %      %
 Ljubljan  <.SBITO     705.64     703.55   +0.30   +1.3
 a         P>                                  %     6%
 Zagreb    <.CRBEX    1983.43    1985.90  -0.12%   +17.
           >                                        39%
 Belgrade  <.BELEX     724.61     722.43   +0.30   +12.
           15>                                 %    50%
 Sofia     <.SOFIX     581.78     582.70  -0.16%   +26.
           >                                        23%
                    BONDS                              
                    Yield      Yield      Spread  Daily
                    (bid)      change     vs      chang
                                          Bund    e in
 Czech                                            sprea
 Republic                                         d
   2-year  <CZ2YT=     -0.824     -0.058  -008bp  -6bps
           RR>                                 s  
   5-year  <CZ5YT=     -0.171     -0.068   +024b  -7bps
           RR>                                ps  
           <CZ10YT       0.54     -0.031   +016b   +0bp
 10-year   =RR>                               ps      s
 Poland                                                
   2-year  <PL2YT=      1.984      0.017   +273b   +2bp
           RR>                                ps      s
   5-year  <PL5YT=      2.856     -0.035   +327b  -3bps
           RR>                                ps  
           <PL10YT      3.598     -0.018   +322b   +1bp
 10-year   =RR>                               ps      s
           FORWARD  RATE       AGREEMENT               
                    3x6        6x9        9x12    3M
                                                  inter
                                                  bank
 Czech     <CZKFRA       0.27       0.24    0.23      0
 Rep       ><PRIBO                                
           R=>                                    
 Hungary   <HUFFRA       0.36       0.41    0.49   0.39
           ><BUBOR                                
           =>                                     
 Poland    <PLNFRA       1.75       1.77   1.795   1.73
           ><WIBOR                                
           =>                                     
 Note:     are for                                     
 FRA       ask                                    
 quotes    prices                                 
 ******************************************************
 ********
 
 (Reporting by Sandor Peto; editing by Richard Lough)

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