September 12, 2018 / 12:36 PM / a month ago

CEE MARKETS-EU vote over Hungary hits forint, crown sets 4-month high vs euro

    * European Parliament launches punitive procedure vs Hungary
    * Forint, Hungarian stocks fall 
    * Czech central bank chief signals further rate hike in Sept
    * Czech crown hits strongest level vs euro since May

 (Recasts with European Parliament vote against Hungary,
impacts)
    By Sandor Peto and Robert Muller
    BUDAPEST/PRAGUE, Sept 12 (Reuters) - Hungarian asset prices
declined across the board on Wednesday after the European
Union's parliament voted to start a punitive procedure against
Hungary for flouting democratic rules.
    The forint traded near record lows against the
crown which rallied after Czech central bank governor
Jiri Rusnok said interest rates could rise further as early as
this month.
    The most severe punishment under the probably lengthy
Article 7 procedure is stripping Hungary of its voting rights in
the EU.
    However, that is highly unlikely to happen as Poland,
against which similar proceedings are under way, is likely to
block the decision which would require unanimity. 
    "Events like tomorrow's Turkish central bank rate decision
and ECB meeting overshadow this," said Gergely Palffy, analyst
of Raiffeisen in Budapest.
    "Investors note this, of course ... but I do not think that
one week from now we will be talking about this," he added.
    The forint fell half a percent against the euro
after the parliament vote to 326.4. It regained some ground by
1202 GMT, when it was nonetheless 0.4 percent weaker from
Tuesday, trading at 325.9.
    The news also dragged down the zloty by about 0.1 percent,
but it also rebounded quickly, to trade almost flat at 4.3095.
    The decision knocked Budapest's main stock index from
slight gains into a half percent decline relative to Tuesday's
close, but by 1202 GMT it narrowed its loss to 0.2 percent.
    Hungarian government bonds yields rose 2-3 basis points,
with the 10-year paper trading at 3.56 percent.
    "I do not think that this (decision) could upset tomorrow's
(bond) auction," one Budapest-based fixed income trader said.
    "Yields may rise (by the auction), but they have been in a
rising trend anyway," the trader added.
    The Czech crown gave up half of its early gains
against the euro, retreating from a 4-month high.
    But trading at 25.595, it was still firmer by a quarter of
percent from Tuesday, buoyed by Rusnok's comments in an
interview to Reuters.
    He said strong growth could allow the bank to continue to
increase its interest rates at its Sept. 26 meeting, and another
rise was also possible before the end of the year. 
    Rusnok also said pressure on the crown "will fade out",
adding, though, that when that would happen remained "a big
unknown".
    Prague outperformed all regional equities indices,
rising 0.8 percent, mainly driven by 1.6 percent firming of the
shares of Komercni Banka, one of the biggest Czech
lenders.       
    Romania's leu eased 0.1 percent to 4.638 against
the euro.
    An adviser to the Romanian central bank, Adrian Vasilescu,
was quoted by the business paper Ziarul Financiar as saying that
a rise in annual inflation to 5.1 percent in August, reported on
Tuesday, was not a surprise to the bank.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1402 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.5950   25.6600    +0.25%    -0.21%
 crown      >                                       
 Hungary    <EURHUF=  325.9000  324.6800    -0.37%    -4.60%
 forint     >                                       
 Polish     <EURPLN=    4.3095    4.3078    -0.04%    -3.09%
 zloty      >                                       
 Romanian   <EURRON=    4.6380    4.6323    -0.12%    +0.90%
 leu        >                                       
 Croatian   <EURHRK=    7.4320    7.4218    -0.14%    -0.02%
 kuna       >                                       
 Serbian    <EURRSD=  118.2600  118.4500    +0.16%    +0.20%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1090.44  1081.440    +0.83%    +1.14%
                                       0            
 Budapest             36313.77  36371.94    -0.16%    -7.78%
 Warsaw                2233.32   2248.35    -0.67%    -9.26%
 Bucharest             8291.07   8282.11    +0.11%    +6.93%
 Ljubljana  <.SBITOP    859.11    861.72    -0.30%    +6.54%
            >                                       
 Zagreb                1809.67   1796.58    +0.73%    -1.80%
 Belgrade   <.BELEX1    723.53    722.43    +0.15%    -4.77%
            5>                                      
 Sofia                  629.51    632.02    -0.40%    -7.08%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.5040    0.0610   +206bps     +8bps
            R>                                      
   5-year   <CZ5YT=R    1.8130    0.0090   +201bps     +2bps
            R>                                      
   10-year  <CZ10YT=    2.1610   -0.0070   +175bps     +1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6440    0.0080   +220bps     +2bps
            R>                                      
   5-year   <PL5YT=R    2.5740   -0.0250   +278bps     -1bps
            R>                                      
   10-year  <PL10YT=    3.2740    0.0060   +286bps     +3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.92      2.11      2.22      1.53
            <PRIBOR=                                
            >                                       
 Hungary                  0.58      0.80      1.03      0.21
                                                    
 Poland                   1.77      1.79      1.84      1.71
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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