November 28, 2018 / 3:32 PM / 12 days ago

CEE MARKETS-Polish stocks extend recovery, Hungarian bond yields rebound

    * Warsaw stocks continue to recover
    * Troubled Polish bank Getin Noble reports decline in Q3
loss
    * Russia-Ukraine tension weighs on CEE mod, impact limited
    * Hungarian government bonds reverse yield decline

 (Adds Polish utility PGE fall, rise of bond yields, kuna
strengthening)
    By Sandor Peto and Alicja Ptak
    BUDAPEST/WARSAW, Nov 28 (Reuters) - Polish stocks rose to a
three-week high on Wednesday, continuing to recover from a
corruption scandal, although tension between Russia and Ukraine
weighed on the mood in central Europe.
    Most regional bourses underperformed the emerging markets
stock index, which rose 0.9 percent due to hopes for a
truce in the U.S.-China trade war.
    Warsaw's bluechip index jumped 1.8 percent but
Budapest's main index fell 0.2 percent, retreating from
Tuesday's 10-month highs.
    Polish shares plunged two weeks ago when the head of the
financial regulator KNF Marek Chrzanowski resigned over
allegations made by the owner of Getin Noble Bank. The
anti-corruption agency CBA said on Tuesday it had detained
Chrzanowski, who denies any wrongdoing.
    Worries that the scandal could hurt the banking system have
eased since the resignation. Polish equities got additional
support from legislation that reversed legal changes concerning
the Supreme Court which had led to a row with the European
Commission.      
    Getin Noble shares were 5.6 percent higher after the
troubled bank reported its third-quarter net loss shrank
compared with a year ago, and said that deposit outflows had
returned to normal levels.
    After falling to a fifth of its end-2007 value by the peak
of the scandal, the stock has firmed more than 25 percent. 
    The only bluechip to fall was state-run power utility PGE
, which dropped almost 5 percent after it expressed
interest in taking over a project to build Poland's first
nuclear power plant.
    The pressure on central European markets from the dispute
between Russia and Ukraine over a naval incident was limited.
    Senior European politicians suggested new sanctions against
Moscow, but diplomatic sources said the divided European Union
was unlikely to act swiftly, if it at all.
    Regional currencies remained range-bound.
    The kuna, which is kept in narrow ranges by the
Croatian central bank, set a six-week high against the euro due
to strong tourism revenues and EU fund inflows, Addiko Bank said
in a note. 
    Regional government bond yields rose before a speech by
Federal Reserve Chairman Jerome Powell later on Wednesday, in
which he may signal that U.S. interest rate increases will 
continue.
    Hungarian yields, after declining since early October, 
rebounded from multi-month lows. The 10-year paper
traded at 3.3 percent, up 7 basis points from session lows. 
    The falling trend was fuelled by expectations for a pick-up
in EU fund inflows, and recently by a slump in interest rate
swap yields, mainly in the 5-year swap.
    "Those positions got overstretched and some people were
unable to hold their positions," one Budapest-based trader said.
   
            CEE       SNAPSHOT   AT                         
            MARKETS             1522 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.9450   25.9400    -0.02%    -1.55%
 crown      >                                       
 Hungary    <EURHUF=  324.3900  324.3500    -0.01%    -4.15%
 forint     >                                       
 Polish     <EURPLN=    4.2946    4.2967    +0.05%    -2.75%
 zloty      >                                       
 Romanian   <EURRON=    4.6585    4.6606    +0.05%    +0.46%
 leu        >                                       
 Croatian   <EURHRK=    7.4180    7.4235    +0.07%    +0.17%
 kuna       >                                       
 Serbian    <EURRSD=  118.2900  118.3900    +0.08%    +0.18%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1063.25  1064.390    -0.11%    -1.38%
                                       0            
 Budapest             39526.98  39601.70    -0.19%    +0.38%
 Warsaw                2262.89   2222.85    +1.80%    -8.06%
 Bucharest             8597.45   8573.96    +0.27%   +10.88%
 Ljubljana  <.SBITOP    823.36    820.20    +0.39%    +2.11%
            >                                       
 Zagreb                1724.94   1724.79    +0.01%    -6.40%
 Belgrade   <.BELEX1    742.78    742.55    +0.03%    -2.24%
            5>                                      
 Sofia                  583.66    583.19    +0.08%   -13.84%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7370    0.0860   +238bps     +8bps
            R>                                      
   5-year   <CZ5YT=R    1.8380    0.0120   +207bps     +1bps
            R>                                      
   10-year  <CZ10YT=    2.0880    0.0260   +174bps     +2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5880    0.0040   +223bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.4470    0.0170   +268bps     +1bps
            R>                                      
   10-year  <PL10YT=    3.1940    0.0270   +284bps     +3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.18      2.28      2.35      2.02
            <PRIBOR=                                
            >                                       
 Hungary                  0.30      0.52      0.82      0.13
                                                    
 Poland                   1.76      1.79      1.83      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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