October 11, 2016 / 1:52 PM / 9 months ago

CEE MARKETS-Leu off three-month lows as vote on Swiss franc mortgages delayed

7 Min Read

* Committees soften mortgages conversion bill, leu rebounds
    * Zagreb stocks hit 3-1/2 year high

 (Adds bill amendments, detail)
    By Sandor Peto and Luiza Ilie
    BUDAPEST/BUCHAREST, Oct 11 (Reuters) - Romania's leu firmed
on Tuesday as lawmakers moved to alter a bill on converting
Swiss franc mortgages into the local currency to ease the burden
on banks.
    The surge in the Swiss franc in recent years has
led many Romanian borrowers to default on their Swiss franc
loans and the bill aims to convert the loans into leu at
historical rates. 
    Other Central European states including Hungary and Poland
have sought similar conversions in recent years.
    The budget and finance committees of the Romanian
parliament's lower house had decided on Monday that the
historical rate should be applied only for loans on which the
repayments exceed half of the borrower's monthly income. 
    That caused the leu to rebound on Monday from
three-month lows against the euro and it firmed further on
Tuesday, to 4.483, 0.3 percent higher by 1350 GMT.
    "Part of the leu firming is a natural correction after the
last few days, and part of it is that idea of converting only
some of the Swiss franc loans," said one trader with a foreign
bank in Bucharest.     
    The leu remained firm even after lawmakers partially
reversed that decision on Tuesday, scrapping the income
criterion and endorsing a proposal to allow conversion of loans
of up to 250,000 Swiss francs.
    They did not vote on the proposals because there was no
quorum, meaning further changes are possible before the bill
comes before parliament again next week. 
    Overwhelming support from Romania's main political
groupings, including leftists and centrists, means the
conversion bill is likely to pass. 
    Romania's 10-year bonds held steady, yielding around 2.99
percent, 8 basis points below better-rated Poland's bonds and 1
basis point above Hungary.
    An overly consumer-friendly conversion could lead to a rise
in Romanian yields, said Raiffeisen analyst Imre Stephan in a
note.
    A further risk is that "additional measures will be decided
in pre-election spending which would add to the already elevated
pressure on this, but mainly next year's budget deficit target",
he added. Romania will hold elections in December.
    The leu shrugged off a dip in annual inflation to -0.6
percent in September from -0.2 percent in August.
    Inflation is anaemic across the region even though there
have been some signs that it has started to rise.
    Consumer prices rose by 0.6 percent in Hungary in annual
terms in September according to figures published on Tuesday.
    Regional bonds and equities were mixed and rangebound.
    The Zagreb bourse's main index touched a 3-1/2-year
high before giving up some ground.
    Croatia's president named Andrej Plenkovic, head of the
conservative HDZ party, as prime minister-designate on Monday,
after tough coalition talks. 
           CEE      SNAP   AT  1510       
           MARKETS  SHOT  CET         
                    CURRENCIES            
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                    bid   clos  chan  in
                          e     ge    2016
 Czech     <EURCZK  27.0  27.0   +0.  -0.0
 crown     =>        200   210   00%    8%
 Hungary   <EURHUF  304.  303.  -0.2  3.30
 forint    =>       6000  8100    6%     %
 Polish    <EURPLN  4.27  4.27   +0.  -0.2
 zloty     =>         00    41   09%    8%
 Romanian  <EURRON  4.48  4.49   +0.  0.80
 leu       =>         30    55   28%     %
 Croatian  <EURHRK  7.50  7.50   +0.  1.77
 kuna      =>         60    65   01%     %
 Serbian   <EURRSD  122.  123.   +0.  -1.2
 dinar     =>       9500  1500   16%    0%
 Note:     calcula  prev  clos  1800      
 daily     ted      ious  e at  CET   
 change    from                       
                    STOC                  
                    KS                
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                          clos  chan  in
                          e     ge    2016
 Prague             893.  891.   +0.  -6.5
                      83    00   32%    4%
 Budapest           2852  2857  -0.1   +19
                    4.85  0.02    6%  .25%
 Warsaw    <.WIG20  1763  1765  -0.1  -5.1
           >         .76   .95    2%    3%
 Buchares           6902  6911  -0.1  -1.4
 t                   .74   .52    3%    5%
 Ljubljan  <.SBITO  731.  732.  -0.1   +5.
 a         P>         42    43    4%   07%
 Zagreb    <.CRBEX  1992  1997  -0.2   +17
           >         .19   .46    6%  .91%
 Belgrade  <.BELEX  634.  642.  -1.1  -1.4
           15>        66    27    8%    7%
 Sofia     <.SOFIX  509.  507.   +0.   +10
           >          89    66   44%  .63%
                    BOND                  
                    S                 
                    Yiel  Yiel  Spre  Dail
                    d     d     ad    y
                    (bid  chan  vs    chan
                    )     ge    Bund  ge
                                      in
 Czech                                spre
 Republic                             ad
   2-year  <CZ2YT=  -0.6  -0.0   +00  -8bp
           RR>        55    82  1bps     s
   5-year  <CZ5YT=  -0.1  0.04   +03   +4b
           RR>        17     3  6bps    ps
           <CZ10YT  0.35  0.02   +03   +3b
 10-year   =RR>        9        0bps    ps
 Poland                                   
   2-year  <PL2YT=  1.78  0.01   +24   +2b
           RR>         3     3  5bps    ps
   5-year  <PL5YT=  2.49  0.00   +29   +0b
           RR>         8     3  7bps    ps
           <PL10YT  3.07  -0.0   +30  -1bp
 10-year   =RR>        7    13  2bps     s
           FORWARD  RATE  AGREEMENT       
                    3x6   6x9   9x12  3M
                                      inte
                                      rban
                                      k
 Czech     <CZKFRA  0.28  0.25  0.22     0
 Rep       ><PRIBO                    
           R=>                        
 Hungary   <HUFFRA  0.78  0.77  0.79  0.87
           ><BUBOR                    
           =>                         
 Poland    <PLNFRA  1.74  1.74  1.75  1.72
           ><WIBOR     5     5        
           =>                         
 Note:     are for                        
 FRA       ask                        
 quotes    prices                     
 *****************************************
 *********************
 
 (Additional reporting by Radu Marinas in Bucharest; Editing by
Catherine Evans)

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