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CEE MARKETS-Czechs double bond sale as expected end of weak crown regime nears
March 29, 2017 / 12:55 PM / 6 months ago

CEE MARKETS-Czechs double bond sale as expected end of weak crown regime nears

    * Czechs sell more 3-year bonds than planned at auction
    * Crown sets 9-month high in 1-month forwards contracts
    * Polish stocks retreat, regulator says banks see lower
profits
    * Hungary central bank - depo cut maintains loose conditions

 (Adds retreat of Polish stocks)
    By Sandor Peto and Bartosz Chmielewski
    BUDAPEST/WARSAW, March 29 (Reuters) - The Czech government
sold twice as many bonds as planned at an auction on Wednesday,
seeking to benefit from low yields before the central bank
removes its cap on the crown.
    The central bank (CNB) has a "hard commitment" to maintain
the cap, which has kept the crown weaker than 27 against the
euro since 2013, at least until the end of the first quarter.
    Most analysts expect the CNB to abandon the cap in April or
May as inflation has risen to its 2 percent target. The CNB has
tripled its foreign exchange reserves since 2013 and has had to
buy euros heavily in the market this year to defend the cap.
    However, there is uncertainty over how Czech assets will
move after the cap is lifted as huge long positions have built
in the crown and government debt, mainly in short maturities.
    The auction was not originally part of the March debt
issuance schedule, but was added by the government early this
week.
    It almost sold the planned 2 billion crown amount of
long-term 0.95/30 bonds as well as 9.45 billion crowns worth of
3-year zero-coupon bonds, much more than the 4 billion crowns
planned. The bonds were sold at an average yield of -0.055
percent, below -0.022 at an auction a week ago.
    The crown set a 9-month high in one-month forwards contracts
 at 26.881 against the euro.
    Elsewhere in Central Europe, Warsaw's stock index
reversed an early rise and fell 0.9 percent by 1424 GMT, led by
bank stocks.
    Financial regulator KNF said the country's banks expect
their combined net profits to fall this year.
    European bank stocks also fell after sources told Reuters
that European Central Bank policymakers were wary of making any
new change on their policy message in April.    
    Hungarian government bond yields fell by about 8 basis
points from Tuesday's fixing, with the 10-year paper's yield
fixed at 3.29 percent.
    The forint eased 0.1 percent to 310 against the
euro.
    The Hungarian central bank announced a bigger than expected
cut in its 3-month deposits on Tuesday.
    Many analysts interpreted that as further policy loosening.
    The bank explained in a 20-page study, confirmed in comments
from its Deputy Governor Marton Nagy, that considering other
market factors, its measure maintained the earlier level of
interbank liquidity rather than boosting it.
    "The truth could be in between the two," one fixed income
trader said. 
     
              CEE        SNAPS   AT  1624          
              MARKETS    HOT    CET           
                         CURRENCIES                
                         Lates  Previ  Daily  Chang
                         t      ous           e
                         bid    close  chang  in
                                       e      2017
 Czech crown             27.02  27.02   +0.0  -0.05
                            00     05     0%      %
 Hungary                 310.0  309.6  -0.13  -0.38
 forint                    000    050      %      %
 Polish                  4.234  4.234  -0.01  4.00%
 zloty                       5      3      %  
 Romanian                4.557  4.556  -0.02  -0.48
 leu                         0      3      %      %
 Croatian                7.433  7.436   +0.0  1.64%
 kuna                        0      5     5%  
 Serbian                 123.8  123.9   +0.0  -0.43
 dinar                     800    100     2%      %
 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      2017
 Prague                  982.2  983.2  -0.10   +6.5
                             6      2      %     8%
 Budapest                32230  32294  -0.20   +0.7
                           .69    .03      %     1%
 Warsaw                  2206.  2225.  -0.84   +13.
                            81     41      %    29%
 Bucharest               7946.  7953.  -0.09   +12.
                            88     88      %    16%
 Ljubljana               777.5  787.3  -1.23   +8.3
                             8      0      %     6%
 Zagreb                  2014.  2077.  -3.00   +1.0
                            83     12      %     0%
 Belgrade     <.BELEX15  737.4  739.4  -0.27   +2.8
              >              7      4      %     0%
 Sofia                   633.3  636.2  -0.46   +8.0
                             4      9      %     0%
                         BONDS                     
                         Yield  Yield  Sprea  Daily
                                       d      
                         (bid)  chang  vs     chang
                                e      Bund   e in
 Czech                                        sprea
 Republic                                     d
   2-year     <CZ2YT=RR  -0.49      0   +025   +5bp
              >              1           bps      s
   5-year     <CZ5YT=RR   0.16  0.006   +053   +7bp
              >                          bps      s
   10-year    <CZ10YT=R  0.988  0.023   +064   +5bp
              R>                         bps      s
 Poland                                            
   2-year     <PL2YT=RR  2.029  -0.02   +277   +2bp
              >                     3    bps      s
   5-year     <PL5YT=RR  2.958  0.009   +333   +7bp
              >                          bps      s
   10-year    <PL10YT=R  3.531  0.006   +319   +4bp
              R>                         bps      s
              FORWARD    RATE   AGREEMENT          
                         3x6    6x9    9x12   3M
                                              inter
                                              bank
 Czech Rep            <   0.28   0.32   0.39      0
              PRIBOR=>                        
 Hungary              <   0.21   0.26   0.35    0.2
              BUBOR=>                         
 Poland               <  1.757  1.783   1.84   1.73
              WIBOR=>                         
 Note: FRA    are for                              
 quotes       ask                             
              prices                          
 **************************************************
 ************
  

 (Additional reporting by Jason Hovet in Prague and Marcin
Goettig in Warsaw; Editing by Alexander Smith and Hugh Lawson)
  
 
 

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