March 21, 2018 / 10:20 AM / a month ago

CEE MARKETS-Zloty eases further on Fed, regional politics ignored

    * Zloty sets new 4-month low, Fed seen signalling further
hikes
    * Poland's tension with Brussels, Berlin flares up
    * Global developments overshadow domestic politics in
markets

    By Sandor Peto and Marcin Goettig
    BUDAPEST/WARSAW, March 21 (Reuters) - The zloty
led a weakening of Central European currencies due to fears that
the U.S. Federal Reserve will issue hawkish comments after its
meeting on Wednesday.
    The zloty set a 4-month low against the euro, trading at
4.2378 at 0917 GMT, down 0.2 percent from Tuesday. 
    While the economic data flow in the region continues to show
robust growth, political jitters help to keep sentiment uneasy.
    But the main cause of the current asset weakness is a likely
rise in Fed interest rates which makes dollar assets relatively
more attractive, market participants said.
    "We do not exclude a stronger fall in prices in case the
risk of a faster normalisation of interest rates in the United
States increases," Bank Pekao analysts said in a note.
    Global politics, like the threat of a trade war between the
United States and its partners, also overshadow local
developments, said Monika Kiss, analyst of the brokerage Equilor
in Budapest.
    "In such risker periods, market liquidity dries up... wait,
wait, sell -- this is what investors do," she said.
    The European Commission dismissed Poland's latest defence of
controversial court reforms on Tuesday, paving the way for more
clashes with Warsaw.
    Poland's Central European ally, Hungary has pledged to block
a procedure to strip Warsaw of its voting rights in the EU.
    But the region's states, which also criticize the
immigration policies backed by Western EU members as too
generous, risk losing some funding provided by wealthy net EU
payers.
    Foreign Minister Jacek Czaputowicz said Poland would look
into ways of getting compensation for its destruction during
World War Two when it was invaded by Germany and Russia.

    The forint was steady at 311.58 against the euro,
and Budapest stocks moved little.
    The surprise defeat of Hungarian ruling party Fidesz at a 
mayoral by-election last month caused some nervousness in
markets, but opinion polls show that the party leads by a wide
margin ahead of parliamentary elections on April 8. 
    Markets also shrugged off in the past week the resignation
of the Slovenian and Slovakian prime ministers, and a request
from Slovenian central bank governor Bostjan Jazbec for police
protection after he received anonymous threats.
    The leader of Romania's ruling Social Democrats Liviu
Dragnea is due to testify on Wednesday in an ongoing trial in
which he stands accused of abuse of office. The leu
eased a shade to 4.6677 against the leu.
    Czech telecoms O2 shares fell 1 percent, after its
controlling owner, Czech billionaire Petr Kellner's investment
firm PPF Group agreed to buy Norwegian telecoms firm Telenor's
 businesses in Central and Eastern Europe.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1017 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4300   25.4180    -0.05%    +0.44%
 crown      >                                       
 Hungary    <EURHUF=  311.5800  311.5900    +0.00%    -0.21%
 forint     >                                       
 Polish     <EURPLN=    4.2378    4.2301    -0.18%    -1.45%
 zloty      >                                       
 Romanian   <EURRON=    4.6677    4.6665    -0.03%    +0.26%
 leu        >                                       
 Croatian   <EURHRK=    7.4380    7.4400    +0.03%    -0.10%
 kuna       >                                       
 Serbian    <EURRSD=  118.6500  118.4800    -0.14%    -0.13%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1126.42  1120.780    +0.50%    +4.48%
                                       0            
 Budapest             37944.91  37954.29    -0.02%    -3.64%
 Warsaw                2274.13   2272.09    +0.09%    -7.60%
 Bucharest             8750.95   8731.99    +0.22%   +12.86%
 Ljubljana  <.SBITOP    822.42    821.92    +0.06%    +1.99%
            >                                       
 Zagreb                1840.23   1843.37    -0.17%    -0.14%
 Belgrade   <.BELEX1    754.23    755.53    -0.17%    -0.73%
            5>                                      
 Sofia                  664.89    660.72    +0.63%    -1.85%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.8820    0.0320   +145bps     +2bps
            R>                                      
   5-year   <CZ5YT=R    1.3430    0.0060   +137bps     +0bps
            R>                                      
   10-year  <CZ10YT=    1.9680    0.0120   +138bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5650    0.0040   +213bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.5010    0.0330   +252bps     +2bps
            R>                                      
   10-year  <PL10YT=    3.3600    0.0370   +277bps     +3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.96      1.08      1.24      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.10      0.18      0.03
                                                    
 Poland                   1.74      1.76      1.78      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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