March 16, 2020 / 12:41 PM / 20 days ago

UPDATE 2-CEE MARKETS-Assets fall even as central banks act to fight virus impact

    * Czech central bank cuts base rate by 50bps
    * NBH announces emergency steps to help businesses
    * Hungarian forint weakens to fresh all-time low vs euro
    * Czech crown plunges 3.5%, Prague stocks at 11-year low

 (Recasts with Czech emergency rate cut, Hungary central bank
actions; updates markets)
    By Anita Komuves and Jason Hovet
    BUDAPEST/PRAGUE, March 16 (Reuters) - The Czech central bank
on Monday cut its main interest rate and the National Bank of
Hungary announced a series of steps to help the economy deal
with the effects of the coronavirus, as regional currencies fell
to new record lows and stock indexes plunged.
    The Czech central bank cut its main interest rate by 50
basis points to 1.75% at an extraordinary meeting on Monday and
said it was ready to decrease rates further if the economy
needed it amid the coronavirus outbreak.
    The Czech crown sank 3% to the 27 per euro level, wiping out
all its gains since the central bank released it from an
intervention regime keeping it weak in April 2017.    
    The central bank had intervened in markets between 2013 and
2017 as part of its ultra-loose monetary policy, buying up tens
of billions euros through the regime. 
    In the months before it ended the regime in 2017, investors
had piled into the crown to take advantage of the expected
firming after the crown was set free. Most investors have stuck
in that positioning since then although the recent market panic
has sent many fleeing, causing the crown to lose more than
others in central and eastern Europe.
    "The move is a clear result of the crown's overboughtness,
because the positioning was very heavy," said Jakub Seidler,
ING's chief economist in Prague.
    "Even investors who were patient (since the end of the
intervention regime in 2017) are very likely exiting positions.
So it is a result of this positioning ... With the market in a
panic mood, people are exiting."
    Prague stocks fell 7.76% to their lowest levels since
April 2009. 
    The Hungarian forint fell to 345 to the euro, a
fresh record low, and traded at 343.80 at 1611 GMT. 
    The NBH announced emergency steps on Monday to help
businesses, boosting the range of collateral it accepts from
banks and calling on lenders to apply a loan repayment
moratorium for firms hit by the coronavirus economic
fallout.
    The NBH also injected liquidity into the banking sector by
accepting total bids worth 748 million euros from commercial
banks for its swaps providing forint liquidity at a Monday
tender, way above its 308 million euro offer.
    The NBH will also launch one-week foreign currency swap
tenders to provide local banks with forint liquidity.

    Hungarian government bond yields jumped on Monday, with the
yield on the 10-year bond rising 46 basis points to 3.26% and
the five-year yield surging 37 basis points to 2.27% according
to the fixings of debt agency AKK.
    Equities in Budapest were down 5.51% by the end of the
trading day.
    The forint first plunged to a new all-time low on Monday
shortly after Prime Minister Viktor Orban told the Parliament
that Hungary would need monetary and fiscal tools to tackle the
expected grave economic impact from the coronavirus.

    The Polish central bank was conducting repo operations on
Monday as an extraordinary measure to improve liquidity in the
bond market, dealers and analysts said.
    Some analysts are also expecting a rate cut as early as
Tuesday, when the Monetary Policy Council will hold a regular
monthly meeting. The Polish central bank does not take generally
rate-setting decisions at regular sittings but the situation may
require extraordinary steps, analysts said.
    Central banks around the world have cut rates and announced
stimulus measures in recent days to ease the economic fallout
from the spread of the coronavirus.     
     
            CEE        SNAPSHOT    AT                         
            MARKETS               1711 CET            
                       CURRENCIE                              
                       S                              
                       Latest     Previous  Daily     Change
                       bid        close     change    in 2020
 Czech                   27.2100   26.2700    -3.45%    -6.53%
 crown                                                
 Hungary                343.8000  340.2900    -1.02%    -3.68%
 forint                                               
 Polish                   4.4248    4.3751    -1.12%    -3.81%
 zloty                                                
 Romanian                 4.8409    4.8260    -0.31%    -1.09%
 leu                                                  
 Croatian                 7.6170    7.5701    -0.62%    -2.25%
 kuna                                                 
 Serbian                117.6600  117.7300    +0.06%    -0.08%
 dinar                                                
 Note:      calculated from                 1800 CET          
 daily                                                
 change                                               
                                                              
                       Latest     Previous  Daily     Change
                                  close     change    in 2020
 Prague                   761.12  825.1500    -7.76%   -31.78%
 Budapest               32304.48  34189.09    -5.51%   -29.90%
 Warsaw                  1341.54   1365.97    -1.79%   -37.61%
 Bucharest               7126.73   7882.19    -9.58%   -28.57%
 Ljubljana                725.41    762.12    -4.82%   -21.65%
 Zagreb                  1405.52   1512.15    -7.05%   -30.33%
 Belgrade   <.BELEX15     697.77    714.24    -2.31%   -12.96%
            >                                         
 Sofia                    423.96    447.95    -5.36%   -25.38%
                                                              
                       Yield      Yield     Spread    Daily
                       (bid)      change    vs Bund   change
                                                      in
 Czech                                                spread
 Republic                                             
   2-year   <CZ2YT=RR     1.9560    0.3270   +283bps    +29bps
            >                                         
   5-year   <CZ5YT=RR     1.6380    0.1230   +233bps     +3bps
            >                                         
   10-year  <CZ10YT=R     1.1040    0.0000   +157bps    -12bps
            R>                                        
 Poland                                                       
   2-year   <PL2YT=RR     1.2170   -0.2120   +209bps    -25bps
            >                                         
   5-year   <PL5YT=RR     1.7200   -0.0770   +241bps    -17bps
            >                                         
   10-year  <PL10YT=R     2.2770    0.4440   +275bps    +33bps
            R>                                        
            FORWARD                                           
                       3x6        6x9       9x12      3M
                                                      interban
                                                      k
 Czech Rep          <       1.83      1.39      0.73      2.31
            PRIBOR=>                                  
 Hungary            <       0.62      0.64      0.68      0.67
            BUBOR=>                                   
 Poland             <       1.16      1.01      0.78      1.69
            WIBOR=>                                   
 Note: FRA  are for ask prices                                
 quotes                                               
 ***************************************************          
 ***********                                          
 

($1 = 0.8945 euros)

 (Additional reporting by Jason Hovet in Prague and Alan
Charlish in Warsaw; Editing by Sherry Jacob-Phillips and Maju
Samuel)
  
 
 
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