May 17, 2017 / 9:27 AM / 3 months ago

CEE MARKETS-Polish bonds firm as central bank seen holding fire

    * Stock markets jittery near multi-year highs, nervous over
U.S.
    * Currencies mostly ease slightly, zloty a touch firmer
    * Polish central bank seen keeping interest rates on hold
    * Some expectations for more hawkish comments after good GDP
data

    By Sandor Peto
    BUDAPEST, May 17 (Reuters) - Risk aversion in global markets
mostly weakened Central European stocks and currencies on
Wednesday, although Polish government bonds firmed after the
size of an auction was cut and ahead of a central bank meeting
that is expected to bring no change. 
    An intensifying political scandal around U.S. President
Donald Trump generally curbed appetite for emerging market
assets, though the impact on Central Europe, which has tight
economic links with the developed euro zone, remained muted.
    Stocks and currencies nevertheless faltered after a rally
following France's presidential election, in which a centrist
candidate saw off a far-right, eurosceptic rival.
    The forint, the crown and the leu
 eased about 0.1 percent against the euro by 0826 GMT.
    The zloty firmed a shade on expectations that the
Polish central bank might employ less dovish rhetoric after its
meeting on Wednesday following robust first-quarter economic
growth data from across the region on Tuesday. 
    Analysts in a Reuters poll conducted before the meeting
projected no change in the bank's record low interest rates all
this year, with a hike seen in the second quarter of 2018.

    Poland's 10-year government bond yield edged up, but at 3.33
percent it was down 7 basis points from Tuesday's peak and still
near six-month lows reached last week.
    The yield started to fall on Tuesday after the Polish
finance ministry said it would offer a smaller amount than usual
at its bond auction on Thursday.
    The Czech government will offer 6 billion crowns worth of
bonds at an auction on Thursday, also much less than the monthly
amounts it had sold in the first quarter.
    "We expect, however, that the demand would not be aggressive
today, as the bonds offered are rather illiquid papers," said
Dalimil Vyskovsky, a Komercni Banka trader.
    Appetite for the region's government bonds remains strong as
core market yields fall and inflation remains low despite
buoyant growth, a Budapest-based trader said.
    "Bonds firm despite the data, defying the textbook," the
trader said, adding that the Hungarian central bank could
continue to keep domestic interbank markets awash with money. 
    But the fragile mood internationally fuelled profit-taking
and jitters in the region's stock prices and indices.
    Improved recommendations from some international banks
helped Hungarian lender OTP rise 1.6 percent to
two-month highs, while some other bank stocks in the region
retreated after a rally partly caused by good Q1 results.
    
             CEE        SNAPS   AT  1026          
             MARKETS    HOT    CET           
                        CURRENCIES                
                        Lates  Previ  Daily  Chang
                        t      ous           e
                        bid    close  chang  in
                                      e      2017
 Czech                  26.47  26.43  -0.15  2.03%
 crown                     00     10      %  
 Hungary                309.9  309.8  -0.04  -0.36
 forint                   500    150      %      %
 Polish                 4.188  4.190   +0.0  5.14%
 zloty                      6      7     5%  
 Romanian               4.555  4.550  -0.11  -0.44
 leu                        0      2      %      %
 Croatian               7.429  7.431   +0.0  1.70%
 kuna                       0      5     3%  
 Serbian                123.0  123.1   +0.0  0.21%
 dinar                    900    050     1%  
 Note:       calculate  previ  close  1800        
 daily       d from     ous    at     CET    
 change                                      
                        STOCK                     
                        S                    
                        Lates  Previ  Daily  Chang
                        t      ous           e
                               close  chang  in
                                      e      2017
 Prague                 1026.  1027.  -0.04   +11.
                           74     12      %    41%
 Budapest               34159  34078   +0.2   +6.7
                          .70    .47     4%     4%
 Warsaw                 2327.  2340.  -0.57   +19.
                           11     34      %    47%
 Bucharest              8459.  8454.   +0.0   +19.
                           76     74     6%    40%
 Ljubljana              778.5  780.2  -0.22   +8.5
                            5      4      %     0%
 Zagreb                 1862.  1863.  -0.06  -6.65
                           13     22      %      %
 Belgrade    <.BELEX15  729.8  730.8  -0.14   +1.7
             >              5      9      %     4%
 Sofia                  662.6  660.8   +0.2   +13.
                            5      7     7%    00%
                        BONDS                     
                        Yield  Yield  Sprea  Daily
                                      d      
                        (bid)  chang  vs     chang
                               e      Bund   e in
 Czech                                       sprea
 Republic                                    d
   2-year    <CZ2YT=RR  -0.04  0.138   +062   +13b
             >              6           bps     ps
   5-year    <CZ5YT=RR  0.023  0.005   +034   +2bp
             >                          bps      s
   10-year   <CZ10YT=R  0.786  -0.03   +038  -1bps
             R>                    3    bps  
 Poland                                           
   2-year    <PL2YT=RR  1.984  0.003   +265   +0bp
             >                          bps      s
   5-year    <PL5YT=RR  2.803  0.005   +312   +2bp
             >                          bps      s
   10-year   <PL10YT=R  3.348  0.001   +294   +2bp
             R>                         bps      s
             FORWARD    RATE   AGREEMENT          
                        3x6    6x9    9x12   3M
                                             inter
                                             bank
 Czech Rep           <   0.34   0.42   0.51      0
             PRIBOR=>                        
 Hungary             <   0.19   0.23   0.33   0.16
             BUBOR=>                         
 Poland              <   1.77    1.8   1.85   1.73
             WIBOR=>                         
 Note: FRA   are for                              
 quotes      ask                             
             prices                          
 *************************************************
 *************
 
 (Additional reporting by Jason Hovet in Prague/Agnieszka
Barteczko and Marcin Goclowski in Warsaw; Editing by Catherine
Evans)
  
 
 

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