March 4, 2019 / 2:49 PM / 8 months ago

CEE MARKETS-Romanian assets gain on hopes for changes in bank tax

    * S&P delays publishing Romania rating outlook in unusual
    * Leu near four-week highs, Romanian stocks outperform
    * Zloty gains beyond 4.3/euro for first time in weeks
    * Polish central bank meeting seen assessing public spending

 (Adds Romanian government bond auction and government letter on
changes in tax plans, OTP Bank shares rise to record high)
    By Sandor Peto
    BUDAPEST, March 4 (Reuters) - Romanian assets gained on
Monday after an unusual decision by Standard & Poor's not to
deliver a rating outlook, raising hopes for changes in a widely
criticised bank tax.
    The government sharply increased its offer at an auction of
2021-expiry bonds, still selling them at an average yield of 3.8
percent, 24 basis points lower than four weeks ago.
    S&P affirmed Romania's 'BBB-/A-3' ratings on Friday.
 But instead of changing its outlook to negative
from stable, as some had expected, the agency delayed its
decision for two weeks, at the request of the government.
    That fuelled hopes for changes in the bank tax. Finance
Minister Eugen Teodorovici said on Wednesday the tax might
exempt several financial assets.
    New taxes imposed this year are painful for banks and, being
linked to the ROBOR interbank rates, complicate
monetary policy.
    Romania could escape a downgrade of its rating outlook if it
disconnects the tax from ROBOR and exempts government bond
holdings from the tax, Raiffeisen analyst Stephan Imre said in a
    A letter to S&P from the government, released by an
opposition lawmaker, pledged to make the tax a fixed rate and
could exempt treasuries and government-backed credit lines.
    The yield on 10-year Romanian government bonds
was bid 12 basis points lower at 4.86 percent, after a jump on
Friday ahead of the S&P rating review.
    The yield remains well above Poland's 10-year bond yield,
which dropped by 2 basis points to 2.864 percent.
    "We see nominal yield levels to remain high in Romania in
the absence of more policy clarity," Erste analysts said in a
    The leu approached four-week highs beyond 4.732
versus the euro. It traded at 4.7405 at 1407 GMT, up 0.1
    Bucharest's main stock index outperformed regional
peers, rising 1.5 percent. Lender Banca Transilvania
gained 4.5 percent.
    Warsaw stocks were steady, while the zloty
 firmed about 0.1 percent, to trade at 4.2995 versus
the euro. It broke 4.3 for the first time since early February. 
    Data showing low inflation and slowing growth knocked the
zloty to its lowest in more than three months at 4.3455 last
month from 18-month highs set at 4.2555 on Jan. 31.
    The Polish central bank will hold its first meeting on
Wednesday where it can look at a government plan to boost
    "Monetary Policy Council meeting ... shouldn't bring any
change ... especially since the possibility of interest rate
cuts vanished after last week's announcement of government
fiscal easing," Millennium Bank said in a note.
    Elsewhere, the stocks of Budapest-based OTP Bank,
which reported record profits for 2018 on Friday, hit record
highs, rising more than 1 percent.
            CEE       SNAPSHOT   AT                         
            MARKETS             1507 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6300   25.6260    -0.02%    +0.30%
 crown      >                                       
 Hungary    <EURHUF=  315.8000  316.2400    +0.14%    +1.67%
 forint     >                                       
 Polish     <EURPLN=    4.2995    4.3045    +0.12%    -0.23%
 zloty      >                                       
 Romanian   <EURRON=    4.7405    4.7455    +0.11%    -1.82%
 leu        >                                       
 Croatian   <EURHRK=    7.4300    7.4275    -0.03%    -0.27%
 kuna       >                                       
 Serbian    <EURRSD=  117.9600  118.0500    +0.08%    +0.29%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1077.98  1075.740    +0.21%    +9.27%
 Budapest             40508.89  40170.66    +0.84%    +3.50%
 Warsaw                2339.46   2333.11    +0.27%    +2.76%
 Bucharest             7778.96   7663.49    +1.51%    +5.35%
 Ljubljana  <.SBITOP    850.73    847.62    +0.37%    +5.78%
 Zagreb                1769.99   1792.79    -1.27%    +1.21%
 Belgrade   <.BELEX1    693.65    691.54    +0.31%    -8.93%
 Sofia                  585.06    585.06    +0.00%    -1.58%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.9140    0.1220   +244bps    +12bps
   5-year   <CZ5YT=R    1.8170    0.0130   +214bps     +3bps
   10-year  <CZ10YT=    1.9390    0.0340   +178bps     +6bps
   2-year   <PL2YT=R    1.6420   -0.1130   +217bps    -12bps
   5-year   <PL5YT=R    2.3160   -0.0090   +264bps     +1bps
   10-year  <PL10YT=    2.9450   -0.0270   +278bps     +0bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.25      2.32      2.33      2.03
 Hungary                  0.44      0.65      0.87      0.15
 Poland                   1.75      1.76      1.75      1.72
 Note: FRA  are for ask prices                              

 (Additional reporting by Luiza Ilie and Radu Marinas in
Bucharest/Alicja Ptak in Warsaw Sandor Peto; Editing by Larry
King and Mark Potter)
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