October 18, 2016 / 9:26 AM / in 9 months

CEE MARKETS-Leu, Bucharest stocks buck firming ahead of CHF bill vote

7 Min Read

* Romanian assets underperform even though risk appetite
returns
    * Romanian parliament to vote on CHF mortgages after 0930
GMT
    * Forint rebounds after swap tender boosted liquidity

    By Sandor Peto and Radu-Sorin Marinas
    BUDAPEST/BUCHAREST, Oct 18 (Reuters) - The leu and Romanian
stocks eased on Tuesday ahead of a vote in parliament on a bill
on the conversion of Swiss franc mortgages into leu that could
drive up banks' costs.
    Other central European assets were mostly up on the day.
    A surge in the Swiss currency since 2008 has led to
widespread defaults on franc-denominated mortgages in central
Europe, pressuring local markets as governments respond by
forcing banks to convert the debt into local currencies, often
at old rates that leave the banks holding sizeable losses. 
    The leu tested 3-month lows against the euro in
early trade. It eased a shade to 4.512 by 0848 GMT, while the
forint and the zloty firmed by 0.15 percent.
    "With a central bank board member saying outright last week
that the central bank would step in should market turmoil arise,
we see limited chances for euro/leu to move above what we
believe is one of the central bank's 'lines in the sand' at
4.54," analysts at ING Bank in Bucharest said in a note. 
    The main index of the Bucharest bourse eased by 0.2
percent to levels near 2-month lows, while other indices in the
region firmed, led by a 0.9 percent rise in Warsaw.
    Romanian government bond yields were flat or higher by a few
basis points, while Polish and Hungarian bond yields mostly
dropped slightly.
    Appetite for the region's high-yielding assets has increased
after two days of risk aversion due to the dollar's surge and
comments from Fed officials. 
    Hungary's 10-year bond yield dropped 1 basis point to 2.99
percent. It is 294 basis points higher than the corresponding
Bund yield.
    Relatively high yields and central bank measures to boost
liquidity in local markets could support Hungarian bonds and
push yields lower if the Fed and the European Central Bank do
not become more hawkish, traders said.
    On Monday the National Bank of Hungary provided swaps worth
200 billion forints ($736 million) to commercial banks at the
first liquidity tender since announcing quantity limits on its
main three-month deposit facility. 
    The swap tender probably contributed to a retreat of the
forint on Monday.
    "That liquidity injection should weaken the forint in
theory, but the forint still attracts investors as its yield is
higher than euro zone levels," one Budapest-based trader said.
    Hungary's upgrade to investment grade by Standard & Poor's
last month has added to demand for forint assets.
    But turnover in central European currency markets including
Poland has been relatively low recently, and that often
increases volatility, another dealer said.
    "The swap tenders in Hungary may lead to a pattern in which
the forint eases on Monday and recovers in the rest of the
week," the dealer added.
           CEE      SNAP   AT  1048       
           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     =>        210   460   09%    9%
 Hungary   <EURHUF  306.  307.   +0.  2.57
 forint    =>       7500  2300   16%     %
 Polish    <EURPLN  4.31  4.32   +0.  -1.3
 zloty     =>         65    29   15%    6%
 Romanian  <EURRON  4.51  4.51  -0.0  0.16
 leu       =>         20    13    2%     %
 Croatian  <EURHRK  7.49  7.50   +0.  1.87
 kuna      =>         90    05   02%     %
 Serbian   <EURRSD  123.  123.   +0.  -1.3
 dinar     =>       1500  1600   01%    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             911.  906.   +0.  -4.6
                      66    97   52%    7%
 Budapest           2880  2861   +0.   +20
                    0.23  2.95   65%  .40%
 Warsaw    <.WIG20  1728  1714   +0.  -7.0
           >         .71   .20   85%    2%
 Buchares           6852  6868  -0.2  -2.1
 t                   .59   .02    2%    7%
 Ljubljan  <.SBITO  724.  723.   +0.   +4.
 a         P>         18    11   15%   03%
 Zagreb    <.CRBEX  1977  1971   +0.   +17
           >         .27   .55   29%  .02%
 Belgrade  <.BELEX  639.  640.  -0.1  -0.7
           15>        32    31    5%    4%
 Sofia     <.SOFIX  505.  506.  -0.0   +9.
           >          95    28    7%   77%
                    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  0.01   +00   +1b
           RR>        57     8  0bps    ps
   5-year  <CZ5YT=  -0.1  -0.0   +03  -1bp
           RR>        04    02  8bps     s
           <CZ10YT  0.39  0.00   +03   +0b
 10-year   =RR>        4     5  3bps    ps
 Poland                                   
   2-year  <PL2YT=  1.77  0.00   +24   +0b
           RR>         4     2  3bps    ps
   5-year  <PL5YT=  2.48  -0.0   +29  -1bp
           RR>         5    07  7bps     s
           <PL10YT  3.05  -0.0   +29  -2bp
 10-year   =RR>        4    13  9bps     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   0.7  0.68  0.68  0.85
           ><BUBOR                    
           =>                         
 Poland    <PLNFRA  1.73  1.73  1.73  1.72
           ><WIBOR     5     5     5  
           =>                         
 Note:     are for                        
 FRA       ask                        
 quotes    prices                     
 *****************************************
 *********************
 
 (Reporting by Sandor Peto; Editing by Hugh Lawson)

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