October 17, 2016 / 10:57 AM / 9 months ago

CEE MARKETS-Zloty, forint, long-term bonds ease on Yellen

8 Min Read

* Zloty, forint ease after Yellen comments
    * Regional yield curves steepen
    * Bucharest stocks ease ahead of vote on CHF loan conversion
bill

    By Sandor Peto
    BUDAPEST, Oct 17 (Reuters) - Poland's zloty and
Hungary's forint slipped in value on Monday while
yields on longer-dated government bonds rose, the same pattern
seen in other emerging and developed economies after remarks by
Federal Reserve Chair Janet Yellen. 
    Short term yields, which remain high relative to those
offered in the euro zone and the United States and so attractive
to investors, held firm or extended recent gains. 
    The yield on Hungary's three-year bond dropped 2 basis
points to 1.33 percent from Friday's fixing, compared with a
rise of 2 bps in the corresponding German yield to -0.637
percent. Poland's two-year yield rose 2 basis points to 1.76
percent, while the 10-year yield followed Bunds 5 basis points
higher, to 3.08 percent.
    The zloty and the forint had both eased
0.3 percent against the euro by 0903 GMT, although the Polish
was off an October low of 4.3169 touched in early trade. 
    A move beyond 4.32-4.34 is unlikely in the short-term, one
Warsaw-based trader said.
    The dollar romped to a nearly seven-month high and
long-dated U.S. bond yields climbed after Yellen said on Friday
the Fed may need to run a "high-pressure" economy to reverse
damage from the 2008-2009 financial crisis. 
    Her remarks raised speculation that Yellen may be willing to
let inflation run above the Fed's 2 percent target and keep an
easy monetary policy stance for a long time.
    That caused the U.S. yield curve to steepen as prices on
longer dated Treasuries, which are most sensitive to inflation
expectations, fell sharply and their yields shot higher.
European yields also rose ahead of Thursday's European Central
bank policy meeting.
    U.S. data on Friday showing a rebound in retail sales in
September reinforced expectations of a Fed interest rate hike in
December, although investors do not see the Fed moving
aggressively thereafter.
    Standard & Poor's decision a month ago to lift Hungary's
credit rating back to investment grade has buoyed the national
currency, and should continue to underpin it, one Budapest-based
dealer said.  
    "I would not say that Yellen's words were frightening ...
the forint should even firm in the short term due to (Hungarian)
fundamental factors," the dealer added.
    Stocks in the European Union's emerging east mostly shrugged
off falls in Asian and Western European equity markets. 
    Czech energy group CEZ shares rose 0.8 percent,
outperforming the Prague market, after its Temelin nuclear
power station Unit 2 went back online at the weekend for the
first time since August. 
    Hungary's FHB rebounded from an initial fall after
the bank's Chairman Zoltan Speder, a businessmen who fell out of
favour with Prime Minister Viktor Orban, resigned. 
    In Warsaw, state-run insurer PZU rose 3 percent,
rebounding from a two-week low following a report in daily Puls
Biznesu that board member Beata Kozlowska-Chyla had resigned.
    Romania's parliament is expected to vote on Tuesday on a
bill to convert Swiss franc mortgages into leu, after worries
about the plan and its likely cost for banks sent the leu
 to three-month lows earlier this month.
    "Pressures on the FX cross remain tilted to the upside ahead
of tomorrow's vote on the CHF bill," ING Bank said in a note.
           CEE      SNAP   AT  1103       
           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     =>        220   255   01%    9%
 Hungary   <EURHUF  306.  305.  -0.3  2.62
 forint    =>       6000  5500    4%     %
 Polish    <EURPLN  4.31  4.30  -0.2  -1.3
 zloty     =>         48    34    7%    2%
 Romanian  <EURRON  4.51  4.50  -0.0  0.19
 leu       =>         05    78    6%     %
 Croatian  <EURHRK  7.50  7.50   +0.  1.80
 kuna      =>         40    75   05%     %
 Serbian   <EURRSD  123.  123.  -0.0  -1.3
 dinar     =>       1500  1200    2%    6%
 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             902.  899.   +0.  -5.5
                      95    16   42%    8%
 Budapest           2849  2839   +0.   +19
                    8.76  2.01   38%  .14%
 Warsaw    <.WIG20  1725  1719   +0.  -7.1
           >         .63   .64   35%    8%
 Buchares           6865  6897  -0.4  -1.9
 t                   .25   .37    7%    9%
 Ljubljan  <.SBITO  723.  724.  -0.1   +3.
 a         P>         23    15    3%   89%
 Zagreb    <.CRBEX  1975  1972   +0.   +16
           >         .71   .42   17%  .93%
 Belgrade  <.BELEX  640.  640.   +0.  -0.5
           15>        28    13   02%    9%
 Sofia     <.SOFIX  508.  508.   +0.   +10
           >          70    69   00%  .37%
                    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  -005  -2bp
           RR>        99    07   bps     s
   5-year  <CZ5YT=  -0.1  -0.0   +03  -2bp
           RR>        29    02  4bps     s
           <CZ10YT  0.32     0   +02  -3bp
 10-year   =RR>        7        4bps     s
 Poland                                   
   2-year  <PL2YT=  1.77  0.00   +24   +0b
           RR>         7     8  2bps    ps
   5-year  <PL5YT=  2.50  0.04   +29   +2b
           RR>         2        7bps    ps
           <PL10YT  3.09  0.05   +30   +2b
 10-year   =RR>        1     5  0bps    ps
           FORWARD  RATE  AGREEMENT       
                    3x6   6x9   9x12  3M
                                      inte
                                      rban
                                      k
 Czech     <CZKFRA  0.28  0.25  0.22     0
 Rep       ><PRIBO                    
           R=>                        
 Hungary   <HUFFRA  0.76  0.74  0.75  0.85
           ><BUBOR                    
           =>                         
 Poland    <PLNFRA  1.73  1.73  1.74  1.72
           ><WIBOR     5    25        
           =>                         
 Note:     are for                        
 FRA       ask                        
 quotes    prices                     
 *****************************************
 *********************
 

 (Additional reporting by Jakub Iglewski in Warsaw; Editing by
Catherine Evans)

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