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CEE MARKETS 2-Assets mixed as Fed, ECB leave investors uncertain
September 18, 2014 / 3:33 PM / 3 years ago

CEE MARKETS 2-Assets mixed as Fed, ECB leave investors uncertain

* Fed, ECB loan allocation leave market trend uncertain
    * Rating rumour lifts forint; zloty down
    * Bonds seesaw, stocks mixed

    By Sandor Peto and Marton Dunai
    BUDAPEST, Sept 18 (Reuters) - Central European assets were
mixed on Thursday as the European Central Bank's allocations of
cheap loans and Wednesday's Federal Reserve meeting left
investors guessing about global trends.
    Hungary's forint gained 0.19 percent against the
euro by 1402 GMT on what one Budapest-based currency dealer said
were hopes that S&P would revise its rating on Hungary upwards
on Friday. 
    Standard & Poor's has a 'BB' rating on Hungary's long-term
foreign currency debt. It improved the outlook to "stable" from
"negative" on March 28.
    Hungary's debt is the highest in the region at around 80
percent of economic output. But its economy grew a robust 3.9
percent in annual terms in the second quarter.
    Recovery slowed in other economies in the region as its main
trading partner, the euro zone, struggled and the European Union
got embroiled in a sanctions war with Russia over the Ukrainian
    The minutes of the Polish central bank's last meeting
confirmed that most of its policymakers expect cuts in the
bank's 2.5 percent main interest rates, to fight deflation and
help the economy grow. 
    The zloty shed 0.36 percent against the euro to 4.2, well
underperforming regional peers.
    Stock markets were mixed. Prague's main index gained
1.1 percent, the index of Warsaw's top 20 stocks fell
0.48 percent and Sofia's main index shed 0.8 percent.
    Government bonds seesawed and closed the day weaker. The
losses were mainly in long maturities, where euro zone and U.S.
Treasury moves tend to have more influence compared with
short-term debt, which is driven by central bank interest rates.
    Poland's 10-year bond yield rose 5 basis points
to 3.09 percent and Hungary's 10-year yield rose 3
basis points to 4.71 percent, even though good demand helped
Hungary lift its offer at its bond auctions. 
    The prospect of loose ECB monetary policy has helped Central
European assets in the past weeks; concern that the Fed may
shift to a more hawkish stance has curbed the gains.
    After its meeting on Wednesday, the Fed reiterated that
rates would stay ultra-low for a "considerable time". But it
added that they might rise faster than expected once they do
start moving.
    The ECB saw far less demand than expected for its new
four-year loans to banks, raising doubts about its stimulus
plans. Dealers said the global backdrop which
drives risk appetite remained uncertain.
    Budapest-based brokerage Erste Investment said it expected a
jump in volatility and turnover in the Budapest Stock Exchange
on Friday, the last session before changes in the weights of its
main index and the regional CECE index 
    Slovenia's telecoms operator, Telekom Slovenia,
extended the gains posted since incoming finance minister Dusan
Mramor said on Monday the privatisation of the company would
continue. Parliament is expected to approve the new centre-left
cabinet of Prime Minister Miro Cerar late on Thursday.
 *                                                            *
 **************** CEE MARKETS SNAPSHOT AT 1602 CET ************ 
 ************************* CURRENCIES *************************
                            Latest  Previous   Daily   Change  
                            bid     close      change  in 2014 
 Czech crown                 27.520    27.530   +0.04%  -0.68% 
 Hungary forint             312.250   312.830   +0.19%  -4.89% 
 Polish zloty                 4.200     4.184   -0.36%  -1.19% 
 Romanian leu                 4.411     4.417   +0.13%  +1.11% 
 Croatian kuna                7.628     7.626   -0.02%  -0.12% 
 Serbian dinar              118.350   118.700   +0.30%  -3.25% 
 Note: daily change calculated from previous close at 1800 CET 
 **************************** STOCKS **************************
                            Latest   Previous  Daily   Change  
                                     close     change  in 2014 
 Prague                       995.22   984.53   +1.09%  +0.84% 
 Budapest                   18668.84 18775.53   -0.57%  +1.83% 
 Warsaw                      2495.90  2515.27   -0.77%  +3.81% 
 Bucharest                   7206.86  7176.20   +0.43% +11.25% 
 Ljubljana                    838.72   834.92   +0.46% +30.85% 
 Zagreb                      1887.87  1881.47   +0.34%  +6.04% 
 Belgrade                     636.72   630.43   +1.00% +15.43% 
 Sofia                        546.26   550.72   -0.81% +11.17% 
 ***************************** BONDS **************************
                        Yield    Yield    Spread     Daily     
                        (bid)    change   vs Bund    change in 
 Czech Republic                                      spread    
   2-year                0.174    +0.027   +022bps    +1bps    
   5-year                0.409    +0.011   +016bps    -3bps    
  10-year                1.169    -0.010   +007bps    -5bps    
   3-year                3.270    +0.020   +327bps    +0bps    
   5-year                3.730    -0.030   +348bps    -7bps    
  10-year                4.760    -0.020   +366bps    -6bps    
   2-year                2.014    -0.052   +206bps    -7bps  
   5-year                2.454    -0.019   +220bps    -6bps  
  10-year                3.199    +0.039   +210bps    -1bps  
 ******************* FORWARD RATE AGREEMENTS ******************
                            3x6     6x9    9x12 3M interbank
 Czech Rep                    0.345   0.360  0.355   0.35 
 Hungary                      2.180   2.250  2.320   2.09 
 Poland                       1.960   1.850  1.860   2.44 
 Note: FRA quotes are for ask prices 
 (Additional reporting Marja Novak in Ljubljana; Editing by
Susan Fenton, Larry King)

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