October 14, 2019 / 10:47 AM / 2 months ago

CEE MARKETS-Polish markets stronger after PiS re-election, Romania auction demand up

    PRAGUE, Oct 14 (Reuters) - Polish bond prices edged up and
the zloty moved sideways on Monday after the ruling nationalist
Law and Justice (PiS) party won a majority in a parliamentary
election, avoiding any surprises for investors.
    In Romania, the first bond tender since the government
collapsed drew stronger demand than a month ago and the finance
ministry sold more paper due in 2023 than expected as markets
were buoyed by lower-than-expected inflation data.
    Poland's ruling PiS party secured a second four-year term,
reinforcing expectations that it will continue reforms,
especially in the judiciary, that have put it on a collision
course with the European Union's executive branch in Brussels.

    For financial markets, analysts said PiS's win signalled a
continuation of government policies. Commerzbank also said that
"a spending offensive" by the government should be expected.
    "We can expect a sharp increase in the minimum wage, greater
fiscal spending and budget deterioration, which are negative for
risk premium," the bank said.
    "We do not foresee the fiscal deficit exceeding 3% (of GDP)
in 2020, but the trends are likely to turn adverse quite soon,"
it added.
    The zloty traded more than 0.1% higher at 4.295 to the euro
at 1036 GMT, and bond yields dipped.
    Warsaw's WIG20 blue-chip index was the only faller
in the region, which a trader said was mainly a correction after
strong gains in the past week.
    Elsewhere, Hungary's forint added 0.2% to 331.30
to the euro and the Czech crown lost 0.1 % to 25.815
while the Romanian leu was mostly flat.
    Central European markets - which have been under pressure in
recent months as currencies touch multi-month or even record
lows - have struggled to gain traction amid global worries over
uncertain U.S.-China trade talks and whether Britain can clinch
a Brexit deal before leaving the EU.
    In Romania, some political concerns have eased since its
Social Democrat government collapsed after failing to secure a
majority to defeat a no-confidence motion last week. 
     President Klaus Iohannis said on Friday he intended to
appoint a prime minister-designate on Monday or Tuesday to form
a government to lead the country until a parliamentary election
in 2020.    
    The yield on 2023 bonds were down 2 basis points at Monday's
    “The lower-than-expected inflation reading from Friday
triggered some mild buying interest for Romanian government
bonds,” ING said in a note previewing the auction.
    “The apparent clarification of political negotiations for
the new government is also helping the curve, but this overlaps
with a general selling wave across emerging markets."
                                CEE MARKETS        SNAPSHOT    AT                        
                                                                 1236 CET                
                                                   Latest      Previous        Daily     Change
                                                   bid         close           change    in 2019
 EURCZK=    Czech crown                            25.8140     25.7925         -0.08%    -0.41%
 EURHUF=    Hungary forint                         331.3000    332.0750        +0.23%    -3.08%
 EURPLN=    Polish zloty                           4.2954      4.3013          +0.14%    -0.14%
 EURRON=    Romanian leu                           4.7530      4.7544          +0.03%    -2.08%
 EURHRK=    Croatian kuna                          7.4325      7.4260          -0.09%    -0.30%
 EURRSD=    Serbian dinar                          117.3200    117.5000        +0.15%    +0.84%
            Note: daily change  calculated from                                1800 CET  
                                                   Latest      Previous        Daily     Change
                                                               close           change    in 2019
 .PX        Prague                                 1014.07     1013.5500       +0.05%    +2.79%
 .BUX       Budapest                               40358.45    40332.56        +0.06%    +3.12%
 .WIG20     Warsaw                                 2149.47     2159.91         -0.48%    -5.59%
 .BETI      Bucharest                              9547.75     9528.71         +0.20%    +29.31%
 .SBITOP    Ljubljana                              871.69      869.71          +0.23%    +8.38%
 .CRBEX     Zagreb                                 1953.25     1945.55         +0.40%    +11.69%
 .BELEX15   Belgrade                               744.99      748.94          -0.53%    -2.19%
 .SOFIX     Sofia                                  561.84      562.11          -0.05%    -5.49%
                                                   Yield       Yield           Spread    Daily
                                                   (bid)       change          vs Bund   change in
            Czech Republic                                                               spread
 CZ2YT=RR   2-year                                 1.2470      -0.0030         +195bps   -1bps
 CZ5YT=RR   5-year                                 1.0470      -0.0110         +176bps   -1bps
 CZ10YT=RR  10-year                                1.3110      0.0060          +178bps   +4bps
 PL2YT=RR   2-year                                 1.5140      0.0030          +222bps   -1bps
 PL5YT=RR   5-year                                 1.7460      -0.0100         +246bps   -1bps
 PL10YT=RR  10-year                                1.9960      -0.0040         +246bps   +3bps
                                FORWARD            RATE        AGREEMENT                 
                                                   3x6         6x9             9x12      3M interbank
            Czech Rep                              2.26        2.24            2.12      2.17
            Hungary                                0.26        0.31            0.34      0.21
            Poland                                 1.73        1.69            1.67      1.72
            Note: FRA quotes    are for ask prices                                       
 (Reporting by Jason Hovet in Prague, Alicja Ptak in Warsaw and
Luiza Ilie in Bucharest
Editing by Gareth Jones)
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