December 22, 2016 / 3:48 PM / 10 months ago

CEE MARKETS-Czech bond yields sink as central bank sticks to crown cap exit plans

* Czech 2-year bond yield near record low
    * Czech central bank still sees exit in mid-2017
    * Polish bonds lag Hungary, but weather political standoff
    * Poland rejects new EU warning over rule of law

 (Adds Czech central bank decisions, interview with Polish
ruling party head)
    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, Dec 22 (Reuters) - Czech two-year
government bond yields traded near record lows on Thursday as
the central bank (CNB), after a policy meeting, reaffirmed plans
to ditch its crown cap around mid-2017 following the extension
of the European Central Bank's stimulus programme.
    Removing the crown's three-year-old ceiling on the weak side
of 27 to the euro would be expected to fuel gains in
the currency.
    That expectation has triggered heavy buying of Czech
government debt and crown forwards, which have forced the
central bank to boost foreign currency reserves via crown
selling to 80 billion euros from 35 billion euros since 2013.
    CNB Governor Jiri Rusnok said he saw no direct impact from
this month's extension of the ECB's asset buying stimulus. Loose
ECB policy could increase upward pressure on the crown, but a
revival of inflation, which has been anaemic in Central Europe
for years, could offset that.
    The CNB said inflation could rise to its 2 percent target in
the third quarter of 2017. 
    "Until (the cap's removal) speculative inflow could continue
increasing, forcing the CNB into elevated interventions to
prevent CZK appreciation," Raiffeisen analysts said in a note
before the CNB comments, which had been widely expected.
     The two-year bond yield traded at -1.044 percent, down 4
basis points, near Wednesday's record lows and 26 basis points
below the corresponding German Bund.
    Elsewhere in Central Europe and in the euro zone, bond
yields mostly rose slightly.
    Hungarian yields were mixed but near record lows, supported
by the central bank's loose policies including Tuesday's cut in
the limit on 3-month deposits.
    Polish assets were little changed on Thursday.
    They have lagged their regional counterparts in recent weeks
partly on political concerns, which have led to a standoff in
Warsaw's parliament over the rule of law and a warning from the
European Commission on Wednesday.
    The head of Poland's ruling party, in an interview with
Reuters, dismissed an EU inquiry into the state of Polish
democracy as "an absolute comedy".  
    But the region's and the country's healthy economic growth
prospects are keeping Polish assets relatively resilient as
investors manage their positions ahead of the year-end.
    
              CEE        SNAPS   AT  1554          
              MARKETS    HOT    CET           
                         CURRENCIES                
                         Lates  Previ  Daily  Chang
                         t      ous           e
                         bid    close  chang  in
                                       e      2016
 Czech crown             27.02  27.01  -0.02  -0.09
                            20     70      %      %
 Hungary                 310.7  310.5  -0.06  1.25%
 forint                    500    650      %  
 Polish                  4.411  4.410  -0.03  -3.48
 zloty                       4      0      %      %
 Romanian                4.528  4.516  -0.26  -0.21
 leu                         5      5      %      %
 Croatian                7.531  7.532   +0.0  1.43%
 kuna                        0      5     2%  
 Serbian                 123.4  123.6   +0.1  -1.61
 dinar                     600    700     7%      %
 Note: daily  calculate  previ  close  1800        
 change       d from     ous    at     CET    
                         STOCK                     
                         S                    
                         Lates  Previ  Daily  Chang
                         t      ous           e
                                close  chang  in
                                       e      2016
 Prague                  916.9  917.5  -0.06  -4.11
                             8      5      %      %
 Budapest                31673  31765  -0.29   +32.
                           .89    .30      %    41%
 Warsaw                  1914.  1927.  -0.70   +2.9
                            33     90      %     7%
 Bucharest               7006.  7022.  -0.23   +0.0
                            33     57      %     3%
 Ljubljana               701.6  703.2  -0.22   +0.7
                             8      2      %     9%
 Zagreb                  1982.  1984.  -0.08   +17.
                            82     46      %    35%
 Belgrade     <.BELEX15  720.5  722.2  -0.23   +11.
              >              3      0      %    87%
 Sofia                   576.6  574.9   +0.3   +25.
                             4      2     0%    11%
                         BONDS                     
                         Yield  Yield  Sprea  Daily
                                       d      
                         (bid)  chang  vs     chang
                                e      Bund   e in
 Czech                                        sprea
 Republic                                     d
   2-year     <CZ2YT=RR  -1.04  -0.03  -025b  -3bps
              >              4      5     ps  
   5-year     <CZ5YT=RR  -0.22  -0.00   +027  -1bps
              >              8      7    bps  
   10-year    <CZ10YT=R  0.475  -0.00   +021  -3bps
              R>                    2    bps  
 Poland                                            
   2-year     <PL2YT=RR  1.951  -0.01   +274  -1bps
              >                     7    bps  
   5-year     <PL5YT=RR  2.704   0.01   +320   +1bp
              >                          bps      s
   10-year    <PL10YT=R  3.447  0.017   +318  -1bps
              R>                         bps  
              FORWARD    RATE   AGREEMENT          
                         3x6    6x9    9x12   3M
                                              inter
                                              bank
 Czech Rep            <   0.28   0.24   0.22      0
              PRIBOR=>                        
 Hungary              <   0.37    0.4   0.48   0.39
              BUBOR=>                         
 Poland               <   1.76   1.78    1.8   1.73
              WIBOR=>                         
 Note: FRA    are for                              
 quotes       ask                             
              prices                          
 **************************************************
 ************
 
    

 (Reporting by Sandor Peto; Editing by Toby Chopra and John
Stonestreet)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below