January 14, 2019 / 3:31 PM / 5 months ago

CEE MARKETS-Tax worry hits Bucharest stocks, Hungarian bond yields fall

    * Bucharest stocks fall on worry over new bank tax
    * Romanian inflation retreats further as expected
    * Central banks supports leu via deposit tool
    * Hungarian bond yields resume fall ahead of CPI data

 (Adds BRD stock fall, Romanian bond and central bank deposit
tenders, new comments, Hungarian bond yields fall)
    By Sandor Peto and Radu-Sorin Marinas
    BUDAPEST/BUCHAREST, Jan 14 (Reuters) - Romanian stocks
 hit a 2-year low as concerns over 2019 tax increases on
the bank and energy sectors have returned.
    Sentiment in Central Europe turned sour anyway as a surprise
fall in China's exports turned the spotlight again on global
economic slowdown worries.
    Bucharest's blue-chip index fell more than 4
percent, below 2-year lows reached last month after the
government announced plans for changes in tax and pensions
    The measures included a tax on bank assets, linked in an
unconventional way to interbank rates which are also in the
focus of monetary policy. 
    Banca Transilvania fell 9.5 percent and BRD
Groupe Societe Generale shed 7.5 percent.
    "There's a lot of uncertainty in the market on the new
banking tax," one Bucharest-based foreign stocks trader said.
    Investors still do not know details of the base of the tax
and whether it would also apply to mandatory reserves, the
trader added.
    Late on Friday, the European Commission also warned Romania,
which holds the EU's rotating presidency, over the government's
plans to decriminalise some forms of corruption.
    The leu shrugged off a continuing fall in
Romania's annual inflation to 3.3 percent in December from 3.4
percent in November. 
    The drop from levels above 5 percent last year to within the
central bank's 1.5-3.5 percent target range increases the chance
that the bank will not increase its interest rates further,
analysts said.
    The government sold less 2023-expiry bonds than planned at
an auction, with the average yield rising to 4.41 percent from
4.34 percent.
    But the leu firmed a shade to 4.68 against the
euro as the central bank reduced market liquidity through its
one-week deposit tool. 
    "The disinflation process in Romania that enabled ROMGBs
(Romanian government bonds) to take part in a broader EM rally
in recent weeks is set to bottom out," Raiffeisen analysts said
in a note.
    Hungarian bond yields, however, resumed their fall which
stalled in the first week of the year. Yields were fixed lower
by about 10 basis points along the curve, with the 10-year yield
set at 2.78 percent.
    The market is optimistic that December inflation data due on
Tuesday will show a further drop from 3.1 percent in the annual
rate in November, one Budapest-based trader said.
    "The Fed may not increase rates further, the ECB may tighten
later and there are global recession fears: global trends
support Hungarian bonds," the trader added.
            CEE       SNAPSHOT   AT                         
            MARKETS             1539 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.5690   25.5660    -0.01%    +0.54%
 crown      >                                       
 Hungary    <EURHUF=  321.4400  321.4000    -0.01%    -0.11%
 forint     >                                       
 Polish     <EURPLN=    4.2900    4.2938    +0.09%    -0.01%
 zloty      >                                       
 Romanian   <EURRON=    4.6800    4.6830    +0.06%    -0.56%
 leu        >                                       
 Croatian   <EURHRK=    7.4350    7.4312    -0.05%    -0.34%
 kuna       >                                       
 Serbian    <EURRSD=  118.3200  118.4300    +0.09%    -0.02%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                 998.14  1011.440    -1.31%    +1.17%
 Budapest             40549.30  40886.06    -0.82%    +3.60%
 Warsaw                2320.21   2335.10    -0.64%    +1.91%
 Bucharest             6926.41   7240.73    -4.34%    -6.19%
 Ljubljana  <.SBITOP    811.66    803.83    +0.97%    +0.92%
 Zagreb                1735.70   1734.51    +0.07%    -0.75%
 Sofia                  567.87    567.46    +0.07%    -4.47%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.7910    0.0920   +239bps    +10bps
   5-year   <CZ5YT=R    1.7150   -0.0200   +206bps     +0bps
   10-year  <CZ10YT=    1.8580    0.0040   +164bps     +2bps
   2-year   <PL2YT=R    1.3480   -0.0190   +195bps     -1bps
   5-year   <PL5YT=R    2.1640   -0.0310   +251bps     -1bps
   10-year  <PL10YT=    2.7480   -0.0080   +253bps     +1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.14      2.18      2.20      2.01
 Hungary                  0.24      0.46      0.70      0.13
 Poland                   1.74      1.73      1.73      1.72
 Note: FRA  are for ask prices                              
 (Reporting by Sandor Peto, editing by Ed Osmond)
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