July 6, 2017 / 1:18 PM / 18 days ago

CEE MARKETS-Currencies, bonds fall as ECB may move towards tightening

7 Min Read

 (Recasts with ECB impact, bond markets, analyst poll on
regional currencies)
    * Currencies retreat as ECB leaves door open to tapering
    * Rise in German 10-year yield weighs on CEE bonds,
currencies
    * Hungarian, Romanian bond auctions draw healthy demand
    * Analyst poll sees leu, crown, zloty firming in next 12
months

    By Sandor Peto
    BUDAPEST, July 6 (Reuters) - Central European currencies and
government bonds fell on Thursday after the European Central
Bank left the door open to removing its bond-buying pledge in
the minutes of its last meeting.
    A tapering of monetary stimulus in the euro zone could also
cut demand for assets in the European Union's eastern markets,
and the prospect of higher yields in the west would make the
region's government debt relatively less attractive.
    "The key negative impact today was the rise in the 10-year
Bund yield to above 0.5 percent," one Budapest-based currency
dealer said. The 10-year German yield was bid at 0.566 percent
at 1218 GMT, up 9.1 basis points.
    Poland's corresponding yield rose 8 basis
points to 3.3945 percent.
    Hungary's 10-year yield rose 9 basis points to 3.22 percent
even though demand at the bond auctions held in the morning was
"surprisingly good", one fixed income trader said. 
    Romania's 10-year bond auction also drew healthy demand
before the ECB published its minutes. 
    "Regional currencies have been pushed down by the same
impact," the trader added. "The ECB was more hawkish than
expected and that lifts the euro in its crosses."
    In early trade, the region's currencies mostly firmed, led
by the zloty as some investors took increasing
divisions in the Polish central bank over inflation and rates as
a sign that it may start to discuss rate hikes late this year.
    But the currencies retreated later, led by the Czech crown
 and the Hungarian forint which shed a
quarter of a percent against the euro by 1227 GMT, while
Poland's zloty shed 0.15 percent.
    Czech domestic markets were closed due to a holiday. 
    The economic data released by Hungary on Thursday were
mixed, with a surprise surge in industrial output in May and the
budget deficit in June. [nB3N1A701Z
    "I do not see any Hungary-specific factor...Emerging market
currencies are falling anyway, like the lira and the rand
," another Hungarian dealer said.
    Central European units are shielded by relatively healthy
economic fundamentals.
    A Reuters poll of analysts showed on Thursday that growth
and a probable kick-off in Czech monetary tightening could lift
three of the region's five main currencies - the leu,
the crown and the zloty - in the next 12 months. 
    The region's main equities indices were treading water,
except for a 1.1 percent rise in Budapest driven by a
rise in shares of OTP Bank, which plans acquisitions
in the region, to a 10-year high.    
                CEE MARKETS  SNAPSH   AT  1427 CET         
                             OT                      
                             CURRENCIES                    
                             Latest  Previo  Daily   Change
                                     us              
                             bid     close   change  in
                                                     2017
 Czech crown                 26.153  26.091  -0.24%   3.27%
                                  0       5          
 Hungary                     309.53  308.71  -0.26%  -0.23%
 forint                          00      50          
 Polish zloty                4.2470  4.2408  -0.15%   3.69%
 Romanian leu                4.5925  4.5907  -0.04%  -1.25%
 Croatian kuna               7.4060  7.4105   +0.06   2.01%
                                                  %  
 Serbian dinar               120.20  120.41   +0.17   2.62%
                                 00      00       %  
 Note: daily    calculated   previo  close   1800          
 change         from         us      at      CET     
                             STOCKS                        
                             Latest  Previo  Daily   Change
                                     us              
                                     close   change  in
                                                     2017
 Prague                      986.78  981.27   +0.56   +7.07
                                                  %       %
 Budapest                    35698.  35298.   +1.13   +11.5
                                 26      14       %      5%
 Warsaw                      2306.9  2307.4  -0.02%   +18.4
                                  9       9              3%
 Bucharest                   8122.7  8142.4  -0.24%   +14.6
                                  2       0              5%
 Ljubljana                   797.29  796.29   +0.13   +11.1
                                                  %      1%
 Zagreb                      1888.0  1878.5   +0.51  -5.35%
                                  9       0       %  
 Belgrade                    709.41  713.88  -0.63%  -1.11%
 Sofia                       712.00  711.42   +0.08   +21.4
                                                  %      1%
                             BONDS                         
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
 Czech                                               spread
 Republic                                            
   2-year                     0.149    0.06   +073b   +4bps
                                                 ps  
   5-year                     0.114   0.011   +018b   -7bps
                                                 ps  
   10-year                    1.024       0   +046b   -9bps
                                                 ps  
 Poland                                                    
   2-year                     1.863  -0.158   +244b  -18bps
                                                 ps  
   5-year                     2.756   0.092   +282b   +1bps
                                                 ps  
   10-year                    3.408   0.085   +285b   +0bps
                                                 ps  
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
                                                     interb
                                                     ank
 Czech Rep              <PR    0.42    0.52     0.6       0
                IBOR=>                               
 Hungary                <BU    0.22    0.27    0.34    0.15
                BOR=>                                
 Poland                 <WI   1.753   1.778   1.831    1.73
                BOR=>                                
 Note: FRA      are for ask                                
 quotes         prices                               
 **********************************************************
 ****
 
 (Additional reporting by Radu Marinas; Editing by Mark
Heinrich)
  
 
 

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