April 11, 2018 / 4:29 PM / in 5 months

CEE MARKETS-Currencies, stocks ease; Poland keeps monetary policy loose

    * Rouble, lira woes moderately weigh on forint, zloty
    * Polish central bank head says rates may stay low for years
    * Polish long-term yields lowest since autumn 2016
    * Czech government raises economic growth forecasts

 (Recasts with Polish central bank decision and comments)
    By Sandor Peto
    BUDAPEST, April 11 (Reuters) - Central European stocks and
currencies fell on Wednesday along with other emerging markets
as geopolitical tensions rose. 
    The region's main equity indexes dropped by 0.1 to 0.2
percent, except for a quarter percent rise in Budapest.
    In currency markets, the Polish zloty and
Hungarian forint both eased by 0.1 percent against the
euro by 1523 GMT, and the leu eased 0.15 percent.
    The Polish central bank kept interest rates on hold as
expected, and  Governor Adam Glapinski said he saw no reason to
change record low interest rates in the next two years.
    The zloty briefly gained after he said the currency's
strengthening had not caused problems in the economy. But it
gave up ground as Glapinski said there were no reasons to think
about policy tightening, and that a moment may come when action
in the opposite direction would be advisable.
    "We believe that, given recent development of inflation
rate, a rate hike is less and less likely to happen in 2019,"
Erste Group analyst Katarzyna Rzentarzewska said in a note. "We
decided to change our baseline scenario to no policy rate hike
next year as well."
    After a surprise decline in Polish annual inflation to 1.3
percent in March, the central bank said inflation would stay
close to its target in the next few years.
    Polish 5- and 10-year government bonds were bid at their
lowest yields since autumn 2016. The 10-year yield dipped below
3 percent, to 2.97 percent.
    Hungary's 10-year government bond yield dropped by 3 basis
points to 2.38 percent. It has declined by almost 20
basis points since Prime Minister Viktor Orban's Fidesz party
won elections on Sunday, ensuring policy predictability.
    "Thursday's auctions could be smoothly sold despite the
lower yields levels," one trader said.
    The Czech crown traded steady, bucking the
weakening of its regional peers.
    The Czech central bank is expected to continue to raise
interest rates. The Czech Finance Ministry raised its growth
forecasts for this year and next on Wednesday. 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1723 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.3150   25.3130    -0.01%    +0.90%
 crown      >                                       
 Hungary    <EURHUF=  311.4400  311.1300    -0.10%    -0.17%
 forint     >                                       
 Polish     <EURPLN=    4.1900    4.1868    -0.08%    -0.33%
 zloty      >                                       
 Romanian   <EURRON=    4.6635    4.6565    -0.15%    +0.35%
 leu        >                                       
 Croatian   <EURHRK=    7.4250    7.4275    +0.03%    +0.07%
 kuna       >                                       
 Serbian    <EURRSD=  118.2000  118.2200    +0.02%    +0.25%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1124.03  1125.020    -0.09%    +4.25%
                                       0            
 Budapest             37971.57  37882.42    +0.24%    -3.57%
 Warsaw                2271.93   2274.81    -0.13%    -7.69%
 Bucharest             8828.34   8841.74    -0.15%   +13.86%
 Ljubljana  <.SBITOP    829.29    829.92    -0.08%    +2.84%
            >                                       
 Zagreb                1805.03   1811.97    -0.38%    -2.05%
 Belgrade   <.BELEX1    737.79    737.07    +0.10%    -2.90%
            5>                                      
 Sofia                  660.64    664.75    -0.62%    -2.48%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.8130   -0.0070   +138bps     +0bps
            R>                                      
   5-year   <CZ5YT=R    1.2030    0.0000   +129bps     +1bps
            R>                                      
   10-year  <CZ10YT=    1.7760   -0.0120   +128bps     +1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5110   -0.0110   +207bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.2420   -0.0400   +233bps     -3bps
            R>                                      
   10-year  <PL10YT=    2.9810   -0.0570   +249bps     -4bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.95      1.06      1.19      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.10      0.18      0.03
                                                    
 Poland                   1.73      1.73      1.76      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto, editing by Larry King)
  
 
 
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