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CEE MARKETS-Romanian assets underperforms as Swiss franc bill spooks
October 18, 2016 / 1:47 PM / a year ago

CEE MARKETS-Romanian assets underperforms as Swiss franc bill spooks

* Romania underperforms despite returning risk appetite
    * New bill on Swiss franc mortgage conversion to hit banks
    * Budapest's stock index .BUX hits 9-year high
    * Forint rebounds after swap tender boosts liquidity

 (Adds Romanian vote, Hungarian stocks rise, Polish Eurobond
issue)
    By Sandor Peto and Radu-Sorin Marinas
    BUDAPEST/BUCHAREST, Oct 18 (Reuters) - Romanian stocks and
government bond prices eased on Tuesday after the Bucharest
parliament passed a bill on the conversion of Swiss franc
mortgages into leu at historically low rates, intensifying fears
that bank costs will rise sharply.
    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, putting pressure on markets as governments respond by
forcing banks to convert the debt into local currencies, often
at pre-existing rates that leave the banks holding big losses. 
    The leu tested 3-month lows against the euro but
by 1245 GMT had rebounded to 4.506, firming by 0.1 percent in
line with other Central European currencies. 
    The Bucharest bourse's main index eased 0.5 percent
to near two-month lows. Banca Transilvania fell 2.1
percent.
    Budapest, gaining by 1.1 percent, led a rise in other
regional markets, pushed up by oil group MOL which
rose 1.8 percent after HSBC raised its target price.
 
    The BUX index has risen 21 percent this year and almost 80
percent since early 2015.
    Romanian government bond yields were flat to a few basis
points (bps) higher, while Polish and Hungarian bond yields
mostly dropped.
    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 3 bps to 2.97 percent,
293 bps 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 was likely to have contributed to a retreat
by the forint on Monday, traders said.
    "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 recently for forint assets.
    Elsewhere, Poland surprised markets by issuing a marketable
Eurobond with 30-year maturity, its longest ever, to take
advantage of ultra-low yields. 
    
           CEE         SNAPSHOT   AT  1445 CET           
           MARKETS                                 
                       CURRENCIES                        
                       Latest    Previous  Daily   Change
                       bid       close     change  in
                                                   2016
 Czech                  27.0200   27.0460   +0.10  -0.08%
 crown                                          %  
 Hungary               306.8600  307.2300   +0.12   2.54%
 forint                                         %  
 Polish                  4.3190    4.3229   +0.09  -1.41%
 zloty                                          %  
 Romanian                4.5060    4.5113   +0.12   0.29%
 leu                                            %  
 Croatian                7.4990    7.5005   +0.02   1.87%
 kuna                                           %  
 Serbian               123.1500  123.1600   +0.01  -1.36%
 dinar                                          %  
 Note:     calculated  previous  close at  1800          
 daily     from                            CET     
 change                                            
                       STOCKS                            
                       Latest    Previous  Daily   Change
                                 close     change  in
                                                   2016
 Prague                  912.89    906.97   +0.65  -4.54%
                                                %  
 Budapest              28936.32  28612.95   +1.13   +20.9
                                                %      7%
 Warsaw                 1714.46   1714.20   +0.02  -7.78%
                                                %  
 Buchares               6833.43   6868.02  -0.50%  -2.44%
 t                                                 
 Ljubljan                728.26    723.11   +0.71   +4.61
 a                                              %       %
 Zagreb                 1980.50   1971.55   +0.45   +17.2
                                                %      2%
 Belgrade                645.71    640.31   +0.84   +0.25
                                                %       %
 Sofia                   505.42    506.28  -0.17%   +9.66
                                                        %
                       BONDS                             
                       Yield     Yield     Spread  Daily
                       (bid)     change    vs      change
                                           Bund    in
 Czech                                             spread
 Republic                                          
   2-year                -0.682    -0.007  -002bp   -1bps
                                                s  
   5-year                -0.113    -0.011   +038b   +0bps
                                               ps  
           <CZ10YT=RR     0.388         0   +034b   +1bps
 10-year   >                                   ps  
 Poland                                                  
   2-year                 1.769    -0.003   +243b   -1bps
                                               ps  
   5-year                 2.462    -0.026   +295b   -2bps
                                               ps  
           <PL10YT=RR     3.027    -0.039   +298b   -3bps
 10-year   >                                   ps  
           FORWARD     RATE      AGREEMENT               
                       3x6       6x9       9x12    3M
                                                   interb
                                                   ank
 Czech             <P      0.28      0.25    0.22       0
 Rep       RIBOR=>                                 
 Hungary           <B       0.7      0.68    0.68    0.82
           UBOR=>                                  
 Poland            <W    1.7275      1.72  1.7275    1.72
           IBOR=>                                  
 Note:     are for                                       
 FRA       ask prices                              
 quotes                                            
 ********************************************************
 ******
 
 (Editing by Louise Ireland)

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