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CEE MARKETS-Croatian assets surge to multi-year highs as economy improves
February 3, 2017 / 10:51 AM / in 6 months

CEE MARKETS-Croatian assets surge to multi-year highs as economy improves

7 Min Read

* Recovering economy boosts kuna, dealers watch central bank
    * Zloty touches new 2-month high, stocks firm
    * Price moves muted as investors await U.S. payroll data
    * Romanian assets off lows but edgy due to political turmoil

    By Sandor Peto and Igor Ilic
    BUDAPEST/ZAGREB, Feb 3 (Reuters) - Croatia's kuna, buoyed by
an improving economy, set its firmest level in over 4 years
against the euro on Friday, while central European currencies
were mixed.
    The region's assets got support in recent days from the
Federal Reserve and the European Central Bank as neither of the
banks signaled tighter than expected policies.
    The kuna, which like the zloty gradually gained
ground in the past weeks, was the strongest since October 2012
at 7.436 on Friday. Dealers said the central bank may intervene
in the market any time to stem the rally.
    Croatia, which enjoys a robust tourism sector, has current
account surpluses. Inflation, near zero, has not been a worry so
far and the economy is also on an upswing.
    The Croatian economy returned to growth last year after a
weak decade. Retail sales data published on Thursday showed a 
robust 5.9 percent annual rise. 
    The equities indices of Warsaw and the much smaller
Zagreb bourse have been the region's top gainers this
year, with 6.4 percent and 8.5 percent rise, respectively. On
Friday the Zagreb index was the highest since August 2011.
    The Croatian government also opened books on Friday for
domestic bond issues, one of the lead arrangers said, to
refinance a 5.5-billion-kuna ($800-million) 10-year bond,
maturing on Feb. 8. 
    Elsewhere in the region, investors were on the sidelines,
awaiting more economic data from the United States.
    "Investors are cautious now ahead of the U.S. non-farm
payroll figures," one Budapest-based fixed income trader said.
Those figures are due at 1330 GMT.
    Hungarian and Polish bond yields rose 1-2 basis points.
    The forint was a tad weaker against the euro at
0936 GMT after data showing disappointing 3.2 percent annual
rise in retail sales in December. The zloty set a new
2-month high at 4.299.
    Romanian assets were off lows hit after a decree passed on
Tuesday triggered massive street protests against corruption
this week, which are likely to continue, and cracks in the
one-month-old government.  
    While inflation in Croatia is still hovering near zero, it
has rebounded in other countries of the region.
    Czech inflation has reached the central bank's target in
December. If the January data due on Feb. 10 are high, that may
refuel speculation that the bank could soon abandon its cap at
27 against the euro soon.
    The crown's exchange rate implied in six-month forward deals
 indicated that recent comments from the central
bank - including after Thursday's meeting - have tamed
speculation for early exit from the cap and a crown surge.
 
    The implied rate reached a 4-week low on Friday at 26.869
after the bank released its new inflation report. 
    
              CEE        SNAPS   AT  1036          
              MARKETS    HOT    CET           
                         CURRENCIES                
                         Lates  Previ  Daily  Chang
                         t      ous           e
                         bid    close  chang  in
                                       e      2017
 Czech crown             27.02  27.03   +0.0  -0.05
                            10     05     4%      %
 Hungary                 309.4  309.3  -0.03  -0.19
 forint                    000    050      %      %
 Polish                  4.300  4.314   +0.3  2.40%
 zloty                       8      5     2%  
 Romanian                4.515  4.520   +0.1  0.44%
 leu                         0      7     3%  
 Croatian                7.436  7.440   +0.0  1.60%
 kuna                        0      5     6%  
 Serbian                 123.9  124.0   +0.1  -0.48
 dinar                     400    600     0%      %
 Note: daily  calculate  previ  close  1800        
 change       d from     ous    at     CET    
                         STOCK                     
                         S                    
                         Lates  Previ  Daily  Chang
                         t      ous           e
                                close  chang  in
                                       e      2017
 Prague                  943.3  940.9   +0.2   +2.3
                             5      1     6%     6%
 Budapest                32640  32575   +0.2   +1.9
                           .27    .16     0%     9%
 Warsaw                  2071.  2065.   +0.3   +6.3
                            58     14     1%     5%
 Bucharest               7499.  7473.   +0.3   +5.8
                            05     61     4%     4%
 Ljubljana               744.0  741.1   +0.4   +3.6
                             9      6     0%     9%
 Zagreb                  2164.  2147.   +0.7   +8.5
                            80     92     9%     2%
 Belgrade     <.BELEX15  699.1  704.6  -0.78  -2.54
              >              6      3      %      %
 Sofia                   605.5  598.0   +1.2   +3.2
                             0      0     5%     5%
                         BONDS                     
                         Yield  Yield  Sprea  Daily
                                       d      
                         (bid)  chang  vs     chang
                                e      Bund   e in
 Czech                                        sprea
 Republic                                     d
   2-year     <CZ2YT=RR  -0.70  -0.03   +001  -5bps
              >              7      9    bps  
   5-year     <CZ5YT=RR  -0.08  -0.01   +023  -2bps
              >              9           bps  
   10-year    <CZ10YT=R  0.456  -0.01   +001  -3bps
              R>                    4    bps  
 Poland                                            
   2-year     <PL2YT=RR  2.186  0.017   +291   +0bp
              >                          bps      s
   5-year     <PL5YT=RR  3.135  0.053   +346   +4bp
              >                          bps      s
   10-year    <PL10YT=R  3.811  0.001   +337  -1bps
              R>                         bps  
              FORWARD    RATE   AGREEMENT          
                         3x6    6x9    9x12   3M
                                              inter
                                              bank
 Czech Rep            <   0.24   0.22   0.23      0
              PRIBOR=>                        
 Hungary              <   0.39    0.5    0.6   0.25
              BUBOR=>                         
 Poland               <  1.765  1.805  1.885   1.73
              WIBOR=>                         
 Note: FRA    are for                              
 quotes       ask                             
              prices                          
 **************************************************
 ************
 
 (Additional reporting by Luiza Ilie and Radu Marinas in
Bucharest; Editing by Tom Heneghan)

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