March 6, 2019 / 9:58 AM / 20 days ago

CEE MARKETS-Zloty rebounds, central bank sees neither cut nor hike

    * Polish central bank cuts CPI forecasts, holds fire as
expected
    * NBP seen maintaining bias despite planned fiscal spending
rise
    * Budapest leads equities rise, OTP Bank shares retest
record high
    * Romanian stocks retreat from 2-and-1/2-month high

 (Recasts with Polish central bank decision and comments, rise
in the crown and Hungarian blue chip stocks)
    By Sandor Peto
    BUDAPEST, March 6 (Reuters) - The zloty regained ground on
Wednesday as the Polish central bank (NBP) slashed its inflation
forecasts at its monthly meeting, keeping interest rates on hold
as expected.
    The bank cut its inflation forecast for this year to 1.2-2.2
percent, but its projection for 2020 included a small risk of
overshooting its target range of 1.5-3.5 percent. 
    Its governor, Adam Glapinski said there was no need to cut
interest rates, while a government spending rise announced late
last month did not increase the probability of rate hikes
either.
    He repeated his view that rates may remain unchanged until
2022. But rate-setter Lukasz Hardt did not rule out a change in
rates and said the fiscal measures would have a significant
effect on the economy.
    The zloty traded flat at 4.298 versus the euro at
1612 GMT, off the day's low of 4.302, but near the 4.3
psychological line and its 200-day moving average.
    Polish government bond yields dropped 2-3 basis points,
tracking Bunds, with the 10-year paper trading at 2.8275
percent. 
    The NBP's comments did not signal a shift in the banks'
earlier views, analysts said.
    Warsaw-based Erste analyst Katarzyna Rzentarzewska said the
group retained its 1.7 percent inflation forecast for Poland for
2019, and there was some upside risk to their 3.8 percent
economic growth projection.
    "We expect rates to remain stable this and next year," she
added.
    Other currencies in the region -- the Czech crown,
the forint and the leu -- firmed by about
0.1 percent versus the euro, helped by some weakening of the
dollar. 
    The crown set a 6-week high, and the forint
, trading at 315.35 against the euro, approached 9-1/2
month highs at 315.
    The Hungarian central bank is expected to start to tighten
liquidity in forint markets late this month, and the Czech
central bank to continue to increase interest rates this year.  
    Budapest led a rise in equity indexes in the region,
driven by oil group MOL and OTP Bank with
the latter re-testing Tuesday's record lows at 12,050 forints.
    Rollercoaster trading in the shares of Banca Transilvania
, Romania's biggest lender, led Bucharest's main index
 into a retreat from a 2-1/2 month high.
    Romanian stocks were helped this week by hopes for changes
in controversial new taxes on banks and energy firms, which were
announced in December.      
    President Klaus Iohannis said on Wednesday he would send a
2019 budget plan containing "false numbers" back to parliament
for re-examination, after the Constitutional Court rejected a
challenge he brought to the spending proposal.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1712 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.5960   25.6180    +0.09%    +0.43%
 crown      >                                       
 Hungary    <EURHUF=  315.3500  315.5000    +0.05%    +1.82%
 forint     >                                       
 Polish     <EURPLN=    4.2980    4.2975    -0.01%    -0.20%
 zloty      >                                       
 Romanian   <EURRON=    4.7430    4.7478    +0.10%    -1.88%
 leu        >                                       
 Croatian   <EURHRK=    7.4190    7.4225    +0.05%    -0.12%
 kuna       >                                       
 Serbian    <EURRSD=  117.9800  118.0100    +0.03%    +0.27%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1080.53  1076.630    +0.36%    +9.53%
                                       0            
 Budapest             41086.90  40718.50    +0.90%    +4.98%
 Warsaw                2327.16   2321.32    +0.25%    +2.22%
 Bucharest             7917.90   7914.44    +0.04%    +7.24%
 Ljubljana  <.SBITOP    865.47    856.60    +1.04%    +7.61%
            >                                       
 Zagreb                1766.70   1767.18    -0.03%    +1.02%
 Belgrade   <.BELEX1    697.65    694.07    +0.52%    -8.41%
            5>                                      
 Sofia                  583.00    582.98    +0.00%    -1.93%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7950    0.0030   +231bps     +2bps
            R>                                      
   5-year   <CZ5YT=R    1.7950   -0.0090   +214bps     +2bps
            R>                                      
   10-year  <CZ10YT=    1.9300    0.0130   +180bps     +5bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6190   -0.1240   +213bps    -11bps
            R>                                      
   5-year   <PL5YT=R    2.2660   -0.0250   +261bps     +1bps
            R>                                      
   10-year  <PL10YT=    2.9080   -0.0250   +278bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.25      2.31      2.34      2.03
            <PRIBOR=                                
            >                                       
 Hungary                  0.42      0.63      0.83      0.15
                                                    
 Poland                   1.74      1.73      1.74      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
    

 (Additional reporting by Luiza Ilie in Bucharest and Alicja
Ptak in Warsaw; Editingb Ken Ferris)
  
 
 
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