July 6, 2017 / 9:31 AM / 3 months ago

CEE MARKETS-Zloty firms as investors mull likelihood of Polish rate hike

    * Dissent in Polish central bank may mean earlier hike
    * Zloty leads rise in CEE currencies
    * Hawkish ECB minutes could put pressure on CEE asset prices
    * German yield rise may curb demand at Hungarian auction

    By Sandor Peto
    BUDAPEST, July 6 (Reuters) - Central European currencies
firmed on Thursday but there was some reticence after the Polish
central bank governor reiterated his view that rates would not
start to rise from record low levels this year or next.
    There was also caution ahead of the publication later in the
day of the minutes from the European Central Bank's last policy
meeting. Should these be more hawkish than expected, they could
weigh on Central European assets.
    The zloty led the slight rise, firming 0.2 percent
to 4.234 against the euro by 0819 GMT, regaining the ground shed
in the previous session as the central bank retained its loose
policy stance.
    Poland's central bank, reporting after its latest policy
meeting, said inflation remained moderate, but some analysts
pointed to increasing divisions within the Monetary Policy
Council over inflation risks and the impact of negative real
interest rates on savings.
    The bank's communication on these matters is
"contradictory", said Nomura analyst Peter Attard Montalto in a
note.
    "This means the minutes (of the bank's meetings) will be
more important going forward."
    Montalto said he believed a rate hike in mid-2018 remained
likely.
    Danske Bank said in a note that the bank was too relaxed
about a likely rise in inflation next year, and that it could
still prompt rate hike discussions later this year.
    Stronger rate hike expectations could support the zloty.   
    A tapering of monetary stimulus in the euro zone by the ECB
could hit demand in the European Union's eastern markets, and
the prospect of higher yields in the West would make the
region's government debt relatively less attractive.
    Bonds on offer at Hungary's auctions on Thursday are
expected to be bought up, though demand could be weaker than at
earlier auctions, and yields could rise a bit, with German
yields also rising, one Budapest-based fixed income trader said.
    "Germany's 10-year bond yield is again banging on the 0.5
percent level, and a break above it could also mean a rise in
our bond yields," the trader said. 
    Romania could sell 10-year bonds at an average yield of 4
percent, a tick up from Wednesday's closing bid of 3.99 percent,
Bucharest-based ING said in a note.
    The sale could draw decent demand as Romanian markets are
recovering from the past two weeks' jitters, helped by
speculation in the local media that the government could water
down a new plan to overhaul corporate taxes.
    Budapest led a rise in regional equities prices, with
the stocks of OTP Bank reaching a 10-year peak.
    The shares of road haulage firm Waberer's rose 1.1
percent as they launched Budapest bourse. The shares are not
part of the bourse's index yet.  
    
                CEE MARKETS  SNAPSH   AT  1019 CET         
                             OT                      
                             CURRENCIES                    
                             Latest  Previo  Daily   Change
                                     us              
                             bid     close   change  in
                                                     2017
 Czech crown                 26.100  26.091  -0.03%   3.48%
                                  0       5          
 Hungary                     308.70  308.71   +0.00   0.04%
 forint                          00      50       %  
 Polish zloty                4.2340  4.2408   +0.16   4.01%
                                                  %  
 Romanian leu                4.5865  4.5907   +0.09  -1.12%
                                                  %  
 Croatian kuna               7.4030  7.4105   +0.10   2.05%
                                                  %  
 Serbian dinar               120.31  120.41   +0.08   2.53%
                                 00      00       %  
 Note: daily    calculated   previo  close   1800          
 change         from         us      at      CET     
                             STOCKS                        
                             Latest  Previo  Daily   Change
                                     us              
                                     close   change  in
                                                     2017
 Budapest                    35552.  35298.   +0.72   +11.0
                                 70      14       %      9%
 Warsaw                      2319.8  2307.4   +0.54   +19.1
                                  8       9       %      0%
 Bucharest                   8168.9  8142.4   +0.33   +15.3
                                  4       0       %      0%
 Ljubljana                   792.95  796.29  -0.42%   +10.5
                                                         0%
 Zagreb                      1879.4  1878.5   +0.05  -5.78%
                                  4       0       %  
 Belgrade                    711.54  713.88  -0.33%  -0.81%
 Sofia                       711.24  711.42  -0.03%   +21.2
                                                         8%
                             BONDS                         
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
 Poland                                                    
   2-year                     1.839  -0.187   +243b  -20bps
                                                 ps  
   5-year                     2.654   0.001   +278b   -2bps
                                                 ps  
   10-year                    3.311   0.004   +282b   -2bps
                                                 ps  
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
                                                     interb
                                                     ank
 Hungary                <BU    0.21    0.23    0.25    0.15
                BOR=>                                
 Poland                 <WI   1.751    1.77   1.819    1.73
                BOR=>                                
 Note: FRA      are for ask                                
 quotes         prices                               
 **********************************************************
 ****
 
 (Additional reporting by Radu Marinas; Editing by Raissa
Kasolowsky)
  
 
 

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