June 5, 2018 / 10:02 AM / 2 months ago

CEE MARKETS-Czech crown leads gains as EU political tensions ease

    * Main CEE currencies gain as global mood remains calmer
    * Cbank divergence ignored, Polish policy seen staying loose
    * Government bonds, stocks mixed

    By Sandor Peto and Marcin Goclowski
    BUDAPEST/WARSAW, June 5 (Reuters) - The Czech crown
 rose on Tuesday after the central bank governor said
rates may rise sooner than expected, as currencies firmed across
the region on easing fears about Italy's future in the euro
zone.
    Governor Jiri Rusnok said the bank may act because of faster
wage growth and a weaker-than-expected crown. 
    Regional assets took a hit in May due to advances in the
dollar and U.S. rates, and concerns over political uncertainty
in Italy and Spain.
    "Nerves over both countries have calmed down, the Italian
10-year bond yield is sharply down... there is no bad news," one
Budapest-based fixed income trader said.
    Hungary's 10-year bonds traded at a yield of 3.03 percent,
down 7 basis points from Monday's fixing.
    Hungarian bond yields have dropped by about 10 basis points
since Italy formed a new government on Friday, with the curve
flattening, the trader said.
    "People are afraid to sell. Those who bought papers when
yields were rising (last month), keep their positions so as to
come out with gains," the trader added.
    In Romania, where inflation is the highest in the region,
bids for bond yields continued to tick up after the central bank
cut liquidity in markets via a rare deposit auction on Monday. 
    Regional markets have largely ignored divergence in monetary
policies in the region's main economies during the last weeks'
selling and the past days' recovery.
    The Czech and Romanian central banks have started to
increase interest rates, but Hungary and Poland have signalled
no change in their record-low rates for years, and the Polish
central bank is expected to reaffirm that stance on Wednesday.
    "There will be probably no surprises (when it comes to the
central bank), so it should not affect the market as well as the
quotation of domestic currency, which should follow the global
trend", Citigroup said in a note.
    The leu and the forint firmed 0.1
percent against the euro by 0849 GMT, the zloty 0.2
percent and the Czech crown 0.3 percent.
    The latter three currencies are off multi-month lows reached
last week, and the leu off a one-month low.
    Regional stock markets were mixed after the past days'
rebound from multi-month lows. 
    A 2.2 percent rebound of Banca Transilvania from
a 4-month low helped Bucharest's main index firm 1
percent.
    Hungary's OTP Bank shed 0.9 percent, driving
Budapest's index lower by 0.8 percent, as the stock
continues to seesaw near the 10,000-forint line.
    
               CEE MARKETS  SNAPSH   AT  1049 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2018
 Czech crown                25.660  25.728   +0.27  -0.52%
                                 0       0       %  
 Hungary                    318.60  318.90   +0.10  -2.53%
 forint                         00      50       %  
 Polish zloty               4.2800  4.2875   +0.18  -2.44%
                                                 %  
 Romanian leu               4.6541  4.6572   +0.07   0.50%
                                                 %  
 Croatian                   7.3835  7.3813  -0.03%   0.60%
 kuna                                               
 Serbian                    117.95  118.07   +0.10   0.38%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2018
 Prague                     1078.9  1080.0  -0.10%   +0.07
                                 1       0               %
 Budapest                   36888.  37194.  -0.82%  -6.32%
                                69      37          
 Warsaw                     2215.3  2210.1   +0.24  -9.99%
                                 5       0       %  
 Bucharest                  8170.0  8093.2   +0.95   +5.37
                                 6       5       %       %
 Ljubljana                  898.18  893.69   +0.50   +11.3
                                                 %      8%
 Zagreb                     1839.0  1838.8   +0.01  -0.21%
                                 1       4       %  
 Belgrade                   746.85  745.01   +0.25  -1.70%
                                                 %  
 Sofia                      637.16  638.33  -0.18%  -5.95%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.979   0.125   +163b   +14bp
                                                ps       s
   5-year                    1.431   0.021   +164b   +3bps
                                                ps  
   10-year                   1.979   0.022   +157b   +3bps
                                                ps  
 Poland                                                   
   2-year                    1.586  -0.002   +224b   +1bps
                                                ps  
   5-year                    2.392  -0.008   +260b   +0bps
                                                ps  
   10-year                   3.211  -0.006   +280b   +1bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    1.06    1.18    1.31       0
               IBOR=>                               
 Hungary               <BU    0.07     0.1    0.18    0.12
               BOR=>                                
 Poland                <WI    1.73    1.75    1.79     1.7
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 
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