January 9, 2019 / 10:57 AM / 2 months ago

CEE MARKETS-Polish yields at three-week high, central bank holds rates

    * Long-term CEE yields continue to track UST yield rebound
    * Polish central bank keeps record-low rates on hold
    * CPI eases; pressure rises on Polish central bank chief
    * OTP Bank, Budapest stock index approach record highs

 (Recasts with Polish interest rate decision, comments from
Polish politicians, Czech auction)
    By Sandor Peto
    BUDAPEST, Jan 9 (Reuters) - Poland's 10-year government bond
yield hit a three-week high of  2.8955 percent on Wednesday as
Central European yields tracked a continuing rebound in U.S.
Treasuries yields.
    Local markets ignored a Polish central bank (NBP) meeting
where interest rates were kept on hold as expected, with
criticism of Governor Adam Glapinski stealing the show from
interest rates.
    Polish inflation continues to leave room for loose policy
after the annual rate fell further below the NBP's 1.5-3.5
percent target to 1.1 percent in December.
    The zloty was little changed near the 4.3
psychological line against the euro. It has faltered in recent
days as pressure mounted on Glapinski to publish details of the
pay of a key aide, after a newspaper reported it was unusually
high.
    "At this stage this (Glapinski's resignation) is an unlikely
scenario unless the PiS (ruling party) concludes that perhaps
there are too many controversies that make Glapinski a major
liability," Rabobank analyst Piotr Matys said in a note.
    The rate-setting Monetary Policy Council is due to hold a
news conference on its policy decision at 1500 GMT.
    Finance Minister Teresa Czerwinska said on Wednesday that
"turbulence" around the central bank "is not supportive to how
foreign investors assess us".
    A PiS spokeswoman said the party would like clarity on
salaries at the central bank.
    If ongoing investigations and attacks worsen the governor's
position and he still refuses to quit, "this in turn could
undermine the credibility of the NBP and could weigh on the
zloty," Matys said.
    Elsewhere, a 2027-expiry bond offered by the Czech Republic
at an auction drew healthy demand following the rebound in bond
yields in the region since the beginning of the year.
    Most currencies and equities in the region gained as
appetite for risk grew in global markets, amid hopes the United
States and China are inching towards a trade deal. 
    Budapest led gains, with its blue-chip stock index
rising 0.6 percent.
    The index set a one-year high in early trade and got near
record highs, driven by OTP, the region's biggest
independent lender, which traded at 11,770 forints, near record
highs beyond 11,850 forints.
        
            CEE       SNAPSHOT   AT                         
            MARKETS             1349 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6400   25.6500    +0.04%    +0.26%
 crown      >                                       
 Hungary    <EURHUF=  321.7500  321.9000    +0.05%    -0.21%
 forint     >                                       
 Polish     <EURPLN=    4.2978    4.3005    +0.06%    -0.19%
 zloty      >                                       
 Romanian   <EURRON=    4.6744    4.6685    -0.13%    -0.44%
 leu        >                                       
 Croatian   <EURHRK=    7.4270    7.4325    +0.07%    -0.23%
 kuna       >                                       
 Serbian    <EURRSD=  118.3000  118.3600    +0.05%    +0.00%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1018.76  1014.360    +0.43%    +3.26%
                                       0            
 Budapest             41067.38  40809.82    +0.63%    +4.93%
 Warsaw                2332.45   2325.19    +0.31%    +2.45%
 Bucharest             7494.67   7484.70    +0.13%    +1.50%
 Ljubljana  <.SBITOP    805.56    805.85    -0.04%    +0.16%
            >                                       
 Zagreb                1739.49   1732.66    +0.39%    -0.53%
 Belgrade   <.BELEX1    693.82    718.24    -3.40%    -8.91%
            5>                                      
 Sofia                  572.21    577.33    -0.89%    -3.74%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.8130    0.1340   +239bps    +14bps
            R>                                      
   5-year   <CZ5YT=R    1.7910    0.0510   +208bps     +5bps
            R>                                      
   10-year  <CZ10YT=    1.8700    0.0450   +164bps     +5bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.4730   -0.0020   +205bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.3420    0.0250   +263bps     +2bps
            R>                                      
   10-year  <PL10YT=    2.8950    0.0390   +267bps     +4bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.09      2.19      2.21      2.01
            <PRIBOR=                                
            >                                       
 Hungary                  0.26      0.49      0.74      0.13
                                                    
 Poland                   1.74      1.77      1.77      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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