May 30, 2018 / 10:03 AM / 5 months ago

CEE MARKETS-Zloty bucks forex rebound on mild inflation, leu slides

    * Polish May inflation lower than expected, weighs on zloty
    * Polish 10-yr bond yield reverses rise after CPI figures
    * CEE currencies off multi-month lows as dollar loses steam
    * Bank stocks extend losses, weighing on indices

 (Adds slide of Romanian assets, new analyst comment)
    By Sandor Peto
    BUDAPEST, May 30 (Reuters) - Mild inflation figures weighed
on the zloty and the leu fall amid fresh political uncertainty
in Romania on Wednesday, while other central European units
rebounded.
    The region's first inflation release for May showed a
pick-up in Poland's annual rate to 1.7 percent from 1.6 percent
in April. The figure was below analysts' average 1.9 percent
forecast and the Polish central bank's 2.5 percent target.
    "The MPC (central bank) is likely to sustain its dovish bias
with low probability of monetary tightening to begin in 2019 as
well," Erste analyst Katarzyna Rzentarzewska said in a note.
    Governor Adam Glapinski said after the bank's May 16 meeting
interest rates could stay on hold until the end of 2019 and
possibly longer, as Poland enjoys low inflation and can be seen
as a safe haven amid global market turbulence..
    Poland's 10-year bond yield initially tracked its closely
watched U.S. peer higher. But it fell 6 basis points from the
days' peak to 3.24 percent by late trade, below Tuesday's close,
while Hungary's corresponding yield rose.
    The zloty eased 0.1 percent to 4.3224 against the
euro by 1447 GMT, while the Czech crown firmed 0.2
percent and the Hungarian forint  gained 0.1 percent. 
    All three currencies were off the lows they hit in recent
weeks as a rally for the dollar and U.S. Treasury yields fueled
a decline in asset prices in emerging markets. The dollar's rise
stalled around 4.16 versus the euro on Wednesday.
    The more illiquid leu, which is usually tightly
managed by the central bank, bucked the rebound. It eased 0.3
percent to 4.6525 versus the euro, setting a three-week low,
just days after touching multi-month highs.
    A rising budget deficit and a government plan to make
mandatory pension funds optional have weighed on Romanian
assets.
    On Wednesday the country's top court ruled that President
Klaus Iohannis must dismiss the chief anti-corruption prosecutor
who has contributed to a sharp rise in conviction rates in the
past years.
    Bucharest's main stock index led a fall of equities
in most of the region's capitals, shedding 2 percent, driven by
a 3.7 percent decline in shares of lender BRD Groupe Societe
Generale.
    Regional bank shares extended their losses as Italy's
political turmoil have kept up pressure on European stocks,
particularly banks which are heavily weighted in central
European share indexes.
    Shares of Poland's biggest lender, PKO BP, fell 4
percent, leading a 1.3 percent decline in Warsaw's blue chip
index, which set a new 16-month low. Warsaw-listed bank
shares eased 2.3 percent.
       
            CEE       SNAPSHOT   AT                         
            MARKETS             1647 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8690   25.9100    +0.16%    -1.26%
 crown      >                                       
 Hungary    <EURHUF=  320.0600  320.3100    +0.08%    -2.86%
 forint     >                                       
 Polish     <EURPLN=    4.3224    4.3180    -0.10%    -3.38%
 zloty      >                                       
 Romanian   <EURRON=    4.6525    4.6400    -0.27%    +0.58%
 leu        >                                       
 Croatian   <EURHRK=    7.3910    7.3895    -0.02%    +0.53%
 kuna       >                                       
 Serbian    <EURRSD=  118.2000  118.1400    -0.05%    +0.25%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1079.66  1073.400    +0.58%    +0.14%
                                       0            
 Budapest             34806.26  34883.94    -0.22%   -11.61%
 Warsaw                2162.48   2191.95    -1.34%   -12.14%
 Bucharest             8040.33   8201.96    -1.97%    +3.70%
 Ljubljana  <.SBITOP    890.93    902.40    -1.27%   +10.49%
            >                                       
 Zagreb                1854.02   1850.63    +0.18%    +0.61%
 Belgrade   <.BELEX1    739.77    740.88    -0.15%    -2.64%
            5>                                      
 Sofia                  634.25    637.11    -0.45%    -6.38%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.8200   -0.1940   +153bps    -26bps
            R>                                      
   5-year   <CZ5YT=R    1.4080    0.0010   +171bps     -6bps
            R>                                      
   10-year  <CZ10YT=    1.9880    0.0280   +165bps     -3bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5810   -0.0010   +230bps     -6bps
            R>                                      
   5-year   <PL5YT=R    2.4450   -0.0460   +275bps    -11bps
            R>                                      
   10-year  <PL10YT=    3.2480   -0.0490   +291bps    -11bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.03      1.16      1.26      0.91
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.28      0.37      0.12
                                                    
 Poland                   1.76      1.76      1.80      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Additional reporting by Luiza Ilie in Bucharest and Pawel
Sobczak in Warsaw
Editing by Andrew Roche and David Holmes
)
  
 
 
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