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CEE MARKETS-Leu eases, concern remains over CHF loan conversions
October 12, 2016 / 9:46 AM / a year ago

CEE MARKETS-Leu eases, concern remains over CHF loan conversions

* Leu eases, CHF loan conversion cost to banks may rise
    * Romanian industrial output recovers but still weak
    * Hungary to announce changes in debt management
    * Stocks ease, Croatian central bank may lift GDP forecasts

    By Sandor Peto and Radu-Sorin Marinas
    BUDAPEST/BUCHAREST, Oct 12 (Reuters) - The leu continued to
ease on Wednesday as concerns over the Romanian government's
plan to convert Swiss franc mortgages lingered after parliament
postponed a vote on a bill on Tuesday.
    Such loans were common in Central Europe before a surge in
value of the franc from 2008 caused a rise in defaults. The bill
would help local Swiss franc borrowers covert their mortgages to
local currency at historical rates.
    Conversions schemes have caused market jitters in Croatia,
Hungary and Poland in past years due to the costs to banks.
    Romanian parliament committees had softened a draft bill on
the conversion on Monday, helping the leu rebound from
3-month lows. However, a day later lawmakers overturned some of
those proposals and the cost to banks may rise even further, ING
analysts said in a note. 
    The final vote is due next week.
    The leu eased 0.3 percent to 4.4965 against the
euro by 0856 GMT.
    Romanian economic data released on Wednesday failed to give
much suppport. The country's industrial output rose by 1.2
percent in annual terms in August, posting recovery for a poor
July, but it remained weak relative to regional peers the
Czechs, Hungary and Poland, who had 7.5-13.1 percent growth.
 
    Romanian assets may face further pressure from legislation
before the country's Dec. 11 elections, while negative inflation
gives support to bonds, Raiffeisen analysts said in a note.
    Romania's 10-year government bond yield was flat at 2.99
percent and Hungary's corresponding yield was also steady at
2.97 percent. 
    Both countries have lower credit ratings than Poland. But
concerns over fiscal policy keep Polish yields higher, even
though the 10-year yield shed 3 basis points to 3.04 percent.
    Regional yields mostly rose in the past days amid
strengthening expectations for a Fed rate hike in December, but
the Hungarian central bank's measures to boost market liquidity
are likely to help the country's bonds outperform, a
Budapest-based fixed income trader said.
    The Debt Agency AKK is also expected to announce a revamp of
debt management at a news conference just before its bi-weekly
bond auctions on Thursday. Details are unknown.
    "I cannot imagine that they would announce anything that
could harm the auction," the trader said.
    Stocks mostly eased in Central Europe, tracking a worldwide
drop due to weak U.S. corporate earnings.
    Zagreb's main index shed 0.4 percent but stayed
near Monday's 3-and-1/2-month highs.
    Croatia's central bank may lift its economic growth
forecasts at its meeting to reflect a recovery of the economy
since 2015 from years of recession. 
    Croatia is also near forming a new government after weeks of
tough coalition talks. 
    
           CEE      SNAP   AT  1056       
           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   230   01%    8%
 Hungary   <EURHUF  305.  305.   +0.  3.11
 forint    =>       1500  1500   00%     %
 Polish    <EURPLN  4.28  4.28   +0.  -0.5
 zloty     =>         15    38   05%    5%
 Romanian  <EURRON  4.49  4.48  -0.3  0.50
 leu       =>         65    25    1%     %
 Croatian  <EURHRK  7.51  7.51   +0.  1.72
 kuna      =>         00    05   01%     %
 Serbian   <EURRSD  122.  123.   +0.  -1.1
 dinar     =>       8900  0600   14%    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             888.  894.  -0.6  -7.1
                      42    57    9%    0%
 Budapest           2841  2847  -0.2   +18
                    3.24  9.24    3%  .78%
 Warsaw    <.WIG20  1751  1757  -0.3  -5.7
           >         .83   .04    0%    7%
 Buchares           6929  6926   +0.  -1.0
 t                   .43   .71   04%    7%
 Ljubljan  <.SBITO  731.  731.  -0.0   +5.
 a         P>         38    42    1%   06%
 Zagreb    <.CRBEX  1994  2002  -0.3   +18
           >         .66   .11    7%  .05%
 Belgrade  <.BELEX  632.  634.  -0.3  -1.7
           15>        73    66    0%    7%
 Sofia     <.SOFIX  510.  509.   +0.   +10
           >          15    59   11%  .69%
                    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>        37     8  3bps    ps
   5-year  <CZ5YT=  -0.1  -0.0   +03  -1bp
           RR>        19    02  6bps     s
           <CZ10YT  0.34  -0.0   +03  -3bp
 10-year   =RR>        4    15  0bps     s
 Poland                                   
   2-year  <PL2YT=  1.77  -0.0   +24  -1bp
           RR>              08  3bps     s
   5-year  <PL5YT=  2.46  0.01   +29   +1b
           RR>         9     8  5bps    ps
           <PL10YT  3.05  -0.0   +30  -5bp
 10-year   =RR>        2    27  1bps     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  0.76  0.78  0.87
           ><BUBOR                    
           =>                         
 Poland    <PLNFRA  1.72  1.72  1.73  1.72
           ><WIBOR     5     5     5  
           =>                         
 Note:     are for                        
 FRA       ask                        
 quotes    prices                     
 *****************************************
 *********************
 

 (Reporting by Sandor Peto; Editing by Alexandra Hudson)

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