October 1, 2019 / 9:25 AM / 18 days ago

CEE MARKETS-Polish zloty lower before mortgage ruling; region's stocks weaker

    BUCHAREST, Oct 1 (Reuters) - The Polish zloty edged lower
against the euro on Tuesday, before a court ruling that could
cut into bank profits. Stocks weakened across central Europe. 
    The European Court of Justice will rule on Thursday on
whether a bank in Poland broke the law when it sold home buyers
mortgages denominated in Swiss francs. A ruling favouring the
borrowers could unleash lawsuits affecting Polish banking
profits for years.
    The ruling could also "be a premise for hedging positions
arising from the possible conversion of foreign currency loans
into zloty," ING Bank said in a research note. 
    "This encourages speculative capital to play for zloty
depreciation. As a result, the risk of EUR/PLN breaking 4.40 is
high this week."
    By 0830 GMT, the zloty was down 0.1% versus the
euro at 4.3740. The Czech crown edged up 0.1%. The
Hungarian forint and Romanian leu were flat
on the day. 
    Polish bond yields were flat on the day. Erste Bank said
that while the ruling could push the zloty over a 4.4 resistance
level, it would not significantly affect yields.
    "In the event of a borrower-positive decision, further
short-lived depreciation above 4.40 versus the EUR cannot be
ruled out," it said in a note. 
    "In the medium term, we expect the zloty to remain weak and
remain on elevated level due to persisting global tensions. When
it comes to yield development, we do not expect any significant
change."
    Warsaw's benchmark index led central European stock
losses, down 0.8% on the day. Bucharest's was down 0.3%.
    In Romania, the Social Democrat government faces a no-
confidence vote later this month after losing its junior
coalition partner.
    Capital markets have so far been unfazed by the political
crisis. Investors were already expecting uncertainty and stalled
policymaking before a presidential election in November and
local and parliamentary polls in mid- and late 2020.
    However, sentiment could turn as the country's budget and
current account deficits have been rising.
    "After the breakdown of the coalition government, fiscal
slippages will become more visible as the year comes to an end
if offsetting budgetary measures are not set," Raiffeisen said
in a note. "The latter seems problematic now given the fact that
a functioning legislative body is non-existing."
    
            CEE       SNAPSHO   AT                      
            MARKETS   T        1100              
                               CET               
                      CURRENC                           
                      IES                        
                      Latest   Previou  Daily    Change
                               s                 
                      bid      close    change   in 2019
 Czech      <EURCZK=  25.7670  25.8000   +0.13%   -0.23%
 crown      >                                    
 Hungary    <EURHUF=  334.710  334.900   +0.06%   -4.07%
 forint     >               0        0           
 Polish     <EURPLN=   4.3741   4.3680   -0.14%   -1.93%
 zloty      >                                    
 Romanian   <EURRON=   4.7473   4.7450   -0.05%   -1.97%
 leu        >                                    
 Croatian   <EURHRK=   7.4140   7.4090   -0.07%   -0.05%
 kuna       >                                    
 Serbian    <EURRSD=  117.330  117.445   +0.10%   +0.83%
 dinar      >               0        0           
 Note:      calculated from             1800            
 daily                                  CET      
 change                                          
                                                        
                      Latest   Previou  Daily    Change
                               s                 
                               close    change   in 2019
 Prague               1039.89  1041.75   -0.18%   +5.41%
                                    00           
 Budapest             40663.6  40601.1   +0.15%   +3.90%
                            5        8           
 Warsaw               2157.07  2173.29   -0.75%   -5.25%
 Bucharest            9541.05  9574.37   -0.35%   +29.22
                                                       %
 Ljubljana  <.SBITOP   859.18   854.71   +0.52%   +6.83%
            >                                    
 Zagreb               1955.23  1963.54   -0.42%   +11.80
                                                       %
 Belgrade   <.BELEX1   754.38   751.08   +0.44%   -0.96%
            5>                                   
 Sofia                 568.57   570.58   -0.35%   -4.36%
                      BONDS                             
                      Yield    Yield    Spread   Daily
                      (bid)    change   vs Bund  change
                                                 in
 Czech                                           spread
 Republic                                        
   2-year   <CZ2YT=R   1.2920  -0.0030   +204bp    -1bps
            R>                                s  
   5-year   <CZ5YT=R   1.1350  -0.0290   +190bp    -6bps
            R>                                s  
   10-year  <CZ10YT=   1.3680   0.0260   +188bp    -3bps
            RR>                               s  
 Poland                                                 
   2-year   <PL2YT=R   1.5140  -0.0030   +226bp    -1bps
            R>                                s  
   5-year   <PL5YT=R   1.8070   0.0290   +257bp    +0bps
            R>                                s  
   10-year  <PL10YT=   2.0570   0.0620   +257bp    +1bps
            RR>                               s  
            FORWARD   RATE     AGREEME                  
                               NT                
                      3x6      6x9      9x12     3M
                                                 interba
                                                 nk
 Czech Rep               2.16     2.09     2.16     2.16
            <PRIBOR=                             
            >                                    
 Hungary                 0.28     0.33     0.37     0.21
                                                 
 Poland                  1.73     1.70     1.68     1.72
                                                 
 Note: FRA  are for ask                                 
 quotes     prices                               
 **********************************************         
 ****************                                
 
 (Reporting by Luiza Ilie in Bucharest and Marcin Goclowski in
Warsaw; editing by Larry King)
  
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