December 5, 2018 / 10:26 AM / 4 months ago

CEE MARKETS-Poland leads stocks, forex easing, Hungarian yields drop

    * Warsaw stocks, zloty ease on global growth fears
    * Polish central bank seen keeping rates on hold
    * Hungarian bond yields fall further ahead of buyback tender
    * Hungarian 10-year yield almost closes gap with Poland

    By Sandor Peto and Alicja Ptak
    BUDAPEST/WARSAW, Dec 5 (Reuters) - Warsaw led an easing of
Central European currencies and stocks on Wednesday amid risk
aversion in global markets ahead of a likely decision by the
Polish central bank (NBP) to keep rates on hold.
    The zloty shed 0.2 percent to trade at 4.2855
against the euro at 0931 GMT, still near 2-month highs.
    Warsaw's blue chip equities index fell 1.2 percent,
retreating from a 3-month high set in the previous session.
    The NBP is expected to keep its benchmark rate on hold at
1.5 percent, and repeat its projection at a news conference that
rates could stay at record lows at least until the end of 2019.
    While global markets are gripped by fears of a global
economic slowdown this year, third-quarter output data released
in the past weeks in Central Europe continue to indicate robust
growth, around 5 percent in annual terms in the case of Poland
and Hungary.
    With crude prices retreating in the past two months, earlier
worries over inflation dissipated in the region. As a result,
government bond yields fell sharply, without hurting currencies.
    Poland's November data released last week showed a slump in
annual headline inflation to 1.2 percent, below the NBP's target
range between 1.5 and 3.5 percent.
    Inflation is expected to rise again next year, even though
the region's economies are seen joining a trend of economic
slowdown in their main export markets.
    "Supporters of loose monetary policy who would want the MPC
(Monetary Policy Council) to stay idle at least until the end of
2019 outnumber these central bankers, who are frustrated with
no response to uncomfortably high projected CPI path," Santander
Bank analysts said in a note.
    Polish bond yields were mixed, with the 10-year yield
 ticking up 1 basis point to 3.05 percent. 
    Hungary's corresponding yield, at 3.09 percent, almost
closed a gap with the better-rated Polish paper, for the first
time since June, as yields dropped ahead of a rare buyback
auction by the Hungarian debt agency AKK.    
    The breakdown of Hungary's third-quarter economic output
growth continued to show a strong rise in household consumption,
but some slowdown next year remains inevitable, analysts said.
    "With news that EU fund inflows have picked up, and after a
Eurobond issue in September, AKK is in a very good position,"
one Budapest-based fixed income trader said.
    "It is cheap to finance forint positions... and sentiment
remains positive despite the past decline in yields. We will
have the year's last primary bond auction tomorrow, so there is
support from the supply side as well," the trader added.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1031 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.9100   25.9000    -0.04%    -1.42%
 crown      >                                       
 Hungary    <EURHUF=  323.8000  323.4400    -0.11%    -3.98%
 forint     >                                       
 Polish     <EURPLN=    4.2855    4.2776    -0.18%    -2.55%
 zloty      >                                       
 Romanian   <EURRON=    4.6535    4.6510    -0.05%    +0.56%
 leu        >                                       
 Croatian   <EURHRK=    7.4020    7.4025    +0.01%    +0.38%
 kuna       >                                       
 Serbian    <EURRSD=  118.0300  118.1300    +0.08%    +0.40%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1056.02  1066.010    -0.94%    -2.05%
 Budapest             40844.74  40945.47    -0.25%    +3.73%
 Warsaw                2315.81   2344.91    -1.24%    -5.91%
 Bucharest             8702.55   8786.58    -0.96%   +12.24%
 Ljubljana  <.SBITOP    815.23    817.81    -0.32%    +1.10%
 Zagreb                1740.23   1736.83    +0.20%    -5.57%
 Belgrade   <.BELEX1    741.57    740.96    +0.08%    -2.40%
 Sofia                  596.11    601.34    -0.87%   -12.01%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.6420    0.0250   +227bps     +4bps
   5-year   <CZ5YT=R    1.7850    0.0120   +208bps     +3bps
   10-year  <CZ10YT=    2.0530    0.0090   +179bps     +1bps
   2-year   <PL2YT=R    1.5580    0.0040   +219bps     +2bps
   5-year   <PL5YT=R    2.5080    0.0240   +280bps     +4bps
   10-year  <PL10YT=    3.0690    0.0250   +281bps     +3bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.18      2.30      2.37      2.01
 Hungary                  0.30      0.52      0.80      0.13
 Poland                   1.75      1.78      1.82      1.72
 Note: FRA  are for ask prices                              
 (Reporting by Sandor Peto;
Editing by Andrew Cawthorne)
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