March 12, 2020 / 11:58 AM / 16 days ago

UPDATE 1-CEE MARKETS-Stocks plummet; Hungary scraps some bond auctions as coronavirus turmoil escalates

 (Adds Hungary bond auction)
    By Krisztina Than
    BUDAPEST, March 12 (Reuters) - Central European stock
markets plunged to multi-year lows on Thursday, led by 8%
declines in both Budapest and Warsaw, after U.S. President
Donald Trump imposed strict limits on travel from Europe in a
bid to halt the spread of the coronavirus.
    Hungary scrapped a 10-year and 20-year bond auction on
Thursday and sold less than planned of five-year bonds as bids
dwindled amid high volatility and uncertainty in markets.
    "The forint has started to weaken and yields climbed upwards
today," a Budapest dealer said, adding that overnight interbank
rates also ticked upwards.
    "If we look at this bond auction positively then we can say
the debt agency can afford not accepting bids, and if we look at
this negatively then this auction has failed," he said.
    Hungary sold 17 billion forints ($56.5 million) worth of
five-year bonds, below its 20 billion offer and significantly
less than the original 60 billion forints the tenders intended
to raise.
    Warsaw's blue-chip index slumped 8.2% to its lowest since
mid-2009. The Prague index fell more than 5% to its lowest
since July 2016. 
    Budapest was at its lowest since May 2017 as investors
digested Trump's unexpected move to restrict travel from Europe
and awaited the European Central Bank's statement and press
conference after a policy meeting on Thursday when it is
expected to announce stimulus measures. 
    The stocks of Central Europe's largest independent bank, OTP
Bank plunged more than 16% below the 10,000 forints
threshold before regaining some ground to trade at 10,340
forints, still down 12.6% at 1104 GMT. Shares of Polish bank
Pekao fell 8.3%.
    "The volatility of zloty and forint exchange rates shot up
and stock markets in Poland and Hungary were battered amid fresh
fears of virus spread, which led to both countries declaring
states of emergency and suspending key economic activities,"
Commerzbank said in a note.
    The Czech Republic was also introducing controls on its
borders with Germany and Austria and banning crossings away from
official frontier border posts to help fight the spread of the
coronavirus, Interior Minister Jan Hamacek said on Wednesday.

    The ECB is all but certain to introduce new stimulus
measures on Thursday, pushing policy closer to its limits to
help the euro zone economy cope with the shock of the
coronavirus pandemic.
   "The only question is, how far-reaching the package of
measures will be," Commerzbank analysts said. "Will the ECB get
the bazooka out again and surprise the market with far-reaching
measures or will it disappoint the market?" 
    Hungary on Wednesday banned inbound travel from Italy, South
Korea, Iran and China for non-Hungarians in response to the
coronavirus outbreak.
    Analysts were increasingly drawing parallels with the 2008
global financial crisis and assessing the expected economic
fallout globally.
    "In CEE FX, all currencies depreciated against the EUR,"
Morgan Stanley said. 
    "Hungary was the only country in CEE where the market did
not imply easing but that is no longer the case after Wednesday.
Moreover, the government declared a state of emergency due to
Covid-19, shutting universities and restricting travel from
certain countries."
    The region's currencies all weakened, with the Czech crown
 losing almost 1%, as markets weigh whether the central
bank will reverse its recent interest rate tightening as the
economy comes under strain.
    "EUR/CZK has been or maybe still is a very crowded trade, so
it is now under biggest pressure from CEE3, and of course (there
is) a lot of space for cutting rates as well even if this is not
an imminent threat probably," a dealer said.
    Romanian lawmakers meet late on Thursday to decide whether
to give their vote of confidence to designated Prime Minister
Florin Citu's government. 
    Citu's minority Liberal Party has been trying to trigger
early elections. His cabinet was initially expected to lose the
vote, but chances for a positive vote have increased as the
spread of coronavirus cases has heightened the need for
political stability rather than upheaval.
            CEE        SNAPSHOT    AT                         
            MARKETS               1145 CET            
                       Latest     Previous  Daily     Change
                       bid        close     change    in 2020
 Czech                   26.0030   25.7600    -0.93%    -2.20%
 Hungary                337.1600  336.2500    -0.27%    -1.78%
 Polish                   4.3435    4.3162    -0.63%    -2.01%
 Romanian                 4.8170    4.8189    +0.04%    -0.60%
 Croatian                 7.5550    7.5755    +0.27%    -1.45%
 Serbian                117.6300  117.6300    +0.00%    -0.05%
 Note:      calculated from                 1800 CET          
                       Latest     Previous  Daily     Change
                                  close     change    in 2020
 Prague                   852.63  885.1000    -3.67%   -23.57%
 Budapest               33633.04  36536.24    -7.95%   -27.02%
 Warsaw                  1381.31   1505.64    -8.26%   -35.76%
 Bucharest               7822.77   8381.47    -6.67%   -21.59%
 Ljubljana                759.65    827.84    -8.24%   -17.95%
 Zagreb                  1429.47   1591.42   -10.18%   -29.14%
 Belgrade   <.BELEX15     732.91    752.28    -2.57%    -8.58%
 Sofia                    464.98    495.12    -6.09%   -18.16%
                       Yield      Yield     Spread    Daily
                       (bid)      change    vs Bund   change
 Czech                                                spread
   2-year   <CZ2YT=RR     1.6130   -0.2300   +263bps    -18bps
   5-year   <CZ5YT=RR     1.1330   -0.0060   +210bps     +4bps
   10-year  <CZ10YT=R     1.1040   -0.0280   +190bps     +2bps
   2-year   <PL2YT=RR     1.3440    0.1110   +236bps    +17bps
   5-year   <PL5YT=RR     1.7660    0.2830   +273bps    +33bps
   10-year  <PL10YT=R     1.8330    0.1200   +263bps    +17bps
                       3x6        6x9       9x12      3M
 Czech Rep          <       1.82      1.38      1.05      2.33
 Hungary            <       0.57      0.56      0.60      0.66
 Poland             <       1.39      1.11      0.98      1.69
 Note: FRA  are for ask prices                                
0 : 0
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