November 24, 2017 / 11:47 AM / 21 days ago

CEE MARKETS-Political spat over leu weakens it near record lows

    * Romanian PM slams central bank for letting leu weaken
    * Romanian bond yields consolidate, but remain fragile
    * Zloty and crown drift off highs, forint regains ground

    By Sandor Peto and Luiza Ilie
    BUDAPEST/BUCHAREST, Nov 24 (Reuters) - The leu eased to
levels near record lows on Friday after Romanian Prime Minister
Mihai Tudose criticised the central bank (NBR) for not
intervening to stop the currency's slide.
    The leu, which traded at 4.655 against the euro at
1108 GMT, set new record lows at 4.6585 earlier this week.
    It weakened in the past weeks due to concern over budget
spending, a ballooning trade deficit, rising inflation,
corruption cases and a controversial judiciary reform.
    It also got hit by a shift in the NBR's policy focus to
market interest rates from the currency exchange rate which it
had kept in relatively narrow ranges for years.
    Romania's 10-year government bond yield has risen about 180
basis points to 4.62 percent in the past 13 months in the
European Union's fastest-growing economy, which recorded an 8.8
percent year-on-year output rise for the third quarter. 
    Neighbouring Hungary's corresponding yield has declined
about 160 basis points to 2.05 percent. The central bank there
is not worried over inflation and is loosening monetary screws.
    Just two months ago, premier Tudose criticised the NBR for a
rise in interbank interest rates amid a liquidity squeeze.
    The weakening of the leu was a result of the shift in focus
in the NBR's policies on keeping market interest rates close to
its benchmark rate, intended to control inflation more
effectively.
    The leu and Romanian bonds stabilised on Friday after their
steep weakening, but the friction between the government and the
central bank creates "a very unfavourable reputation", one
Budapest-based fixed income trader said.
    "It is hard to foresee the interest rate path in that
overheated economy. It is not unsustainability, but the risks
are priced in the form of risk premia," the trader added.
    One Bucharest-based dealer said Tudose's criticism was not
surprising, adding that the leu was not expected to weaken past
4.7 against the euro before Christmas, but may reach new record
lows.
    Other currencies in the region were also consolidating ahead
of the weekend.
    The Czech crown, which reached a 4-and-1/2-year
high late on Thursday, shed 0.1 percent, as did the zloty
 which drifted off Wednesday's four-month highs.
    The zloty also moved off Wednesday's 6-month highs against
the forint, which regained some ground after a fall
around Tuesday's meeting, where the Hungarian central bank
announced new measure to push long-term interest rates lower.
    In equities markets, the shares of Romania's second-biggest
bank, Banca Transylvania rose 1.4 percent after it
said it had reached an agreement with Greece's Eurobank
 to buy its Romanian unit Bancpost.    
               CEE MARKETS  SNAPSH   AT  1208 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.440  25.423  -0.06%   6.16%
                                 0       5          
 Hungary                    312.20  312.37   +0.05  -1.08%
 forint                         00      00       %  
 Polish zloty               4.2110  4.2055  -0.13%   4.58%
 Romanian leu               4.6550  4.6526  -0.05%  -2.58%
 Croatian                   7.5610  7.5645   +0.05  -0.08%
 kuna                                            %  
 Serbian                    119.40  119.39  -0.01%   3.31%
 dinar                          00      00          
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1051.7  1046.0   +0.55   +14.1
                                 6       3       %      2%
 Budapest                   39755.  39962.  -0.52%   +24.2
                                30      72              2%
 Warsaw                     2491.9  2503.9  -0.48%   +27.9
                                 2       3              3%
 Bucharest                  7799.9  7778.6   +0.27   +10.0
                                 1       9       %      9%
 Ljubljana                  781.55  781.69  -0.02%   +8.91
                                                         %
 Zagreb                     1863.1  1865.6  -0.13%  -6.60%
                                 9       0          
 Belgrade                   739.24  736.19   +0.41   +3.05
                                                 %       %
 Sofia                      667.13  667.91  -0.12%   +13.7
                                                        6%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.389   0.065   +108b   +7bps
                                                ps  
   5-year                    0.991   0.039   +131b   +3bps
                                                ps  
   10-year                   1.769   0.011   +141b   -1bps
                                                ps  
 Poland                                                   
   2-year                    1.536   0.015   +223b   +1bps
                                                ps  
   5-year                    2.562   0.033   +288b   +2bps
                                                ps  
   10-year                   3.344   0.024   +298b   +1bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    1.05    1.23    1.37       0
               IBOR=>                               
 Hungary               <BU    0.08    0.09    0.13    0.03
               BOR=>                                
 Poland                <WI    1.79  1.8325  1.9125    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Reporting by Sandor Peto; Editing by Peter Graff)
  
 
 

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