May 25, 2017 / 8:48 AM / 2 months ago

CEE MARKETS-Warsaw leads stocks rise, Hungarian bonds firm at auction

8 Min Read

    * Fed comments on rate caution helps CEE assets
    * Warsaw leads stock gains, JSW and PGNiG Q1 results help
    * Hungarian bond sale draws strong demand on IRS
announcement

 (Adds Polish central bank governor comments, Hungarian bond
auction results)
    By Sandor Peto
    BUDAPEST, May 25 (Reuters) - Warsaw led Central European
equities higher on Thursday as emerging market stocks firmed
after the U.S. Federal Reserve signalled a cautious approach to
rate hikes and Polish energy firms PGNiG and JSW reported strong
earnings.
    The prospect of slower U.S. rate hikes than had recently
been expected could trigger a flow of funds from dollar assets
into higher-yielding emerging markets, traders sad.
    The zloty tested 21-month highs against the euro,
touching this week's strongest levels at 4.1716.
    Polish central bank governor Adam Glapinski said the zloty
would remain resilient to expected monetary tightening in the
U.S. and the euro zone. 
    He said the zloty was at "competitive levels".
    "Indeed, almost every gauge of real value points to its
undervaluation. For these reasons, the zloty will prove
resilient to any tapering," the governor said, in a commentary
published by the Official Monetary and Financial Institutions
Forum.
    Warsaw's blue-chip stock index jumped almost 1.5
percent at the opening but halved its gains by 1305 GMT,
although it was still outperforming its main Western European
counterparts. 
    Poland's dominant gas firm PGNiG and JSW,
the EU's biggest coking coal producer, reported higher than
expected first-quarter earnings.
    PGN stocks jumped almost 5 percent and JSW firmed 3.7
percent.
    Budapest's index firmed slightly, but stayed below
Monday's record levels as the shares of OTP Bank <OTPB.BU gained
1.1 percent, but drug maker Richter stocks retreated. 
    Hungarian bonds extended their gains, helped by robust
demand at Thursday's auctions, where the government sold bonds
worth 52 billion forints ($189.54 million), 15 billion forints
more than planned.
    The bonds were sold at average yields below early secondary
market levels and retained their price gains in afternoon trade.
    Demand was partly fuelled by an announcement from the
central bank that it would reopen interest rate swaps (IRS)
earlier used by commercial banks to hedge their government bond
buying.
    The IRSs which will expire in February 2019 could mainly
help the short end of the yield curve, while all the Hungarian
bonds on offer could draw healthy demand, traders said.
    Hungary's 3-year bonds, after heavy oversubscription at the
auction, traded at a yield of 0.78 percent, down 6 basis points
from Wednesday's fixing.
    Rate setters told the Reuters Central & Eastern Europe
Investment Summit this week that Hungary and Poland would keep
monetary policy loose through to 2018, shrugging off rising
inflation, while the Czech central bank may be the region's
first to tighten later this year.
    The forint traded at 307.74 against the euro, off
the three-month highs reached on Wednesday at 307.16.
    
                CEE MARKETS  SNAPSH   AT  1505 CET         
                             OT                      
                             CURRENCIES                    
                             Latest  Previo  Daily   Change
                                     us              
                             bid     close   change  in
                                                     2017
 Czech crown                 26.437  26.453   +0.06   2.16%
                                  0       0       %  
 Hungary                     307.74  307.81   +0.02   0.35%
 forint                          00      00       %  
 Polish zloty                4.1805  4.1817   +0.03   5.34%
                                                  %  
 Romanian leu                4.5505  4.5496  -0.02%  -0.34%
 Croatian kuna               7.4270  7.4273   +0.00   1.72%
                                                  %  
 Serbian dinar               122.67  122.69   +0.02   0.55%
                                 00      00       %  
 Note: daily    calculated   previo  close   1800          
 change         from         us      at      CET     
                             STOCKS                        
                             Latest  Previo  Daily   Change
                                     us              
                                     close   change  in
                                                     2017
 Prague                      1010.7  1010.7   +0.01   +9.68
                                  9       3       %       %
 Budapest                    34324.  34251.   +0.22   +7.26
                                 89      21       %       %
 Warsaw                      2342.0  2324.9   +0.74   +20.2
                                  8       9       %      3%
 Bucharest                   8581.1  8549.0   +0.38   +21.1
                                  7       6       %      2%
 Ljubljana                   791.12  788.54   +0.33   +10.2
                                                  %      5%
 Zagreb                      1853.2  1853.2   +0.00  -7.10%
                                  1       6       %  
 Belgrade                    736.47  735.64   +0.11   +2.66
                                                  %       %
 Sofia                       658.37  660.74  -0.36%   +12.2
                                                         7%
                             BONDS                         
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
 Czech                                               spread
 Republic                                            
   2-year                    -0.098   0.083   +057b   +10bp
                                                 ps       s
   5-year                    -0.022   0.023   +034b   +6bps
                                                 ps  
   10-year                    0.793  -0.054   +042b   -2bps
                                                 ps  
 Poland                                                    
   2-year                     1.935  -0.008   +261b   +1bps
                                                 ps  
   5-year                     2.756  -0.017   +312b   +2bps
                                                 ps  
   10-year                    3.333  -0.002   +296b   +3bps
                                                 ps  
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
                                                     interb
                                                     ank
 Czech Rep              <PR    0.36    0.44    0.52       0
                IBOR=>                               
 Hungary                <BU    0.19    0.23    0.29    0.15
                BOR=>                                
 Poland                 <WI   1.757    1.78   1.825    1.73
                BOR=>                                
 Note: FRA      are for ask                                
 quotes         prices                               
 **********************************************************
 ****
    

($1 = 274.3500 forints)

 (Additional reporting by Luiza Ilie in Bucharest/Bartosz
Chmielewski and Marcin Goettig in Warsaw; Editing by Catherine
Evans and Ed Osmond)
  
 
 

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