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CEE MARKETS-Assets retreat ahead of Romanian bond auction
March 20, 2017 / 10:38 AM / 8 months ago

CEE MARKETS-Assets retreat ahead of Romanian bond auction

    * Zloty, forint off multi-week highs
    * Leu near multi-year low, IMF warns over budget deficit
    * Romania holds bond auction, two previous auctions failed
    * Equities also retreat after post-Fed gains

    By Sandor Peto
    BUDAPEST, March 20 (Reuters) - Central European currencies
and stocks gave up ground on Monday  after Friday's warning from
the International Monetary Fund about a rise in Romania's budget
deficit and ahead of a government bond auction in Bucharest.
    Regional assets had firmed last week as risk appetite rose
after the Federal Reserve suggested that future U.S. rate hikes
will not come as quickly as expected.
    That change mainly helped regional currencies and stocks,
while the prospect of rising U.S. interest rates keeps bond
yields in Central Europe near their highest levels for months.
    The leu and Romanian government bonds have
underperformed regional peers this year due to huge protests
against corruption last month and concerns that the budget
deficit will overshoot targets under the new leftist government.
    The IMF warned on Friday that the shortfall could far exceed
targets this year and next, bloated by tax cuts and wage hikes,
unless the government takes adjustment measures.
    The leu fell 0.2 percent against the euro on Monday to
4.562, piercing the 4.56 line at which the central bank
intervened several times in the past years to defend the
currency.
    The forint and the zloty eased 0.1
percent, but they stayed near the multi-week highs, which they
reached on Friday, while the leu is near its weakest levels for
almost 4 years.
    Romania, which rejected all bids at two bond tenders earlier
this month, offers 10-year bonds at an auction on Monday.
    A long-duration paper like that may not be the best offer
amid expectations for a global yield rise, but its high coupon
and the relatively good liquidity of the bond may counterbalance
the duration risk somewhat, Raiffeisen analyst Stephan Imre said
in a note.
    "Verbal interventions by the central bank – hinting at its
readiness to defend the RON in line with its earlier practice
when the currency was breaking levels slightly above 4.55/EUR
–would be definitely a catalyst for a successful auction," he
added.
    Hungarian and Polish government bonds were treading water
near their highest levels for months.
    "Inflation figures released in the region recently may have
shifted expectations for the yield trajectories towards higher
levels," one Budapest-based fixed income trader said.
    Hungarian short-term debt and money market yields,
meanwhile, hover near zero, kept low by the policy of the
Hungarian central bank which will hold a meeting next week.
    "Due to the improving growth and inflation trends, it will
become difficult for the central bank to justify loose monetary
policy," said Monika Kiss, analyst of Equilor brokerage.
    
              CEE        SNAPS   AT  1047          
              MARKETS    HOT    CET           
                         CURRENCIES                
                         Lates  Previ  Daily  Chang
                         t      ous           e
                         bid    close  chang  in
                                       e      2017
 Czech crown             27.02  27.02   +0.0  -0.05
                            00     35     1%      %
 Hungary                 308.6  308.4  -0.05  0.06%
 forint                    500    850      %  
 Polish                  4.285  4.282  -0.06  2.77%
 zloty                       0      6      %  
 Romanian                4.562  4.554  -0.17  -0.59
 leu                         0      1      %      %
 Croatian                7.407  7.410   +0.0  2.00%
 kuna                        0      2     4%  
 Serbian                 123.8  123.9   +0.1  -0.38
 dinar                     200    900     4%      %
 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                  979.4  980.7  -0.14   +6.2
                             5      9      %     8%
 Budapest                32434  32778  -1.05   +1.3
                           .87    .00      %     5%
 Warsaw                  2278.  2296.  -0.82   +16.
                            18     97      %    95%
 Bucharest               7966.  7969.  -0.03   +12.
                            95     41      %    45%
 Ljubljana               801.8  801.7   +0.0   +11.
                             2      2     1%    74%
 Zagreb                  2163.  2177.  -0.64   +8.4
                            31     24      %     5%
 Belgrade     <.BELEX15  745.7  744.2   +0.1   +3.9
              >              2      9     9%     5%
 Sofia                   635.6  634.9   +0.1   +8.3
                             2      8     0%     9%
                         BONDS                     
                         Yield  Yield  Sprea  Daily
                                       d      
                         (bid)  chang  vs     chang
                                e      Bund   e in
 Czech                                        sprea
 Republic                                     d
   2-year     <CZ2YT=RR  -0.43   0.11   +033   +13b
              >              7           bps     ps
   5-year     <CZ5YT=RR  0.171  -0.00   +048  -2bps
              >                     2    bps  
   10-year    <CZ10YT=R  0.975   0.02   +052   +0bp
              R>                         bps      s
 Poland                                            
   2-year     <PL2YT=RR  2.116  -0.00   +289   +1bp
              >                     3    bps      s
   5-year     <PL5YT=RR  3.077  0.004   +339  -2bps
              >                          bps  
   10-year    <PL10YT=R  3.735      0   +328  -2bps
              R>                         bps  
              FORWARD    RATE   AGREEMENT          
                         3x6    6x9    9x12   3M
                                              inter
                                              bank
 Czech Rep            <   0.29   0.32   0.42      0
              PRIBOR=>                        
 Hungary              <   0.32   0.42   0.59   0.23
              BUBOR=>                         
 Poland               <   1.78   1.81   1.87   1.73
              WIBOR=>                         
 Note: FRA    are for                              
 quotes       ask                             
              prices                          
 **************************************************
 ************
 
 (Additional reporting by Radu Marinas in Bucharest; Editing by
Toby Chopra)
  
 
 

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