June 18, 2019 / 9:45 AM / 4 months ago

CEE MARKETS-Investors await Fed, digest dovish Draghi comments

    By Alan Charlish
    WARSAW, June 18 (Reuters) - Central European markets
remained relatively calm on Tuesday, as traders held fire ahead
of a meeting of U.S. rate-setters, but dovish comments from
European Central Bank chief Mario Draghi sent Polish bond yields
lower.
    The U.S. Federal Reserve is expected to leave interest rates
unchanged when it releases a statement and economic projections
on Wednesday after a two-day meeting, but markets are looking
for indications of rate cuts later in the year.
    "The market is going to wait for tomorrow's Fed
announcement," said a Warsaw-based currency trader, adding that
emerging market currencies have strengthened recently on
expectations that the Fed will signal rate cuts.
    The Polish zloty and Czech crown were
slightly lower against the euro. The Warsaw-based trader
attributed the zloty's move to a correction from recent highs,
while Komercni Banka analysts said there were no real local
factors affecting the crown and that volatility should pick up
by Wednesday evening after the Fed announcement.
    The Czech central bank will hold a policy meeting on June
26. 
    It raised the main two-week repo rate by 25
basis points to 2.00% in May, but Governor Jiri Rusnok signalled
stable rates until mid-2020. Czech National Bank board member
Oldrich Dedek told Reuters in an interview on Monday he sees no
reason to vote for an interest rate increase.
    The Hungarian forint strengthened slightly against
the euro to 322.16. Brokerage Equilor said in a note that it
expected the currency to move in the 322-324 range with the
possibility of tomorrow's Fed statement bringing bigger
movements.
    Polish 10-year bonds tracked euro zone yields
lower, after Mario Draghi said the European Central Bank will
need to ease policy again, possibly through new rate cuts or
asset purchases, if inflation doesn't head back to its target.

    Stocks were mixed, with Poland's benchmark WIG 20 index
gaining 0.3%, while benchmark indices in Prague and
Budapest fell 0.3% and 0.8% respectively.

            CEE        SNAPSHOT   AT                         
            MARKETS              1127 CET            
                       CURRENCI                              
                       ES                            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2019
 Czech                  25.5920   25.5570    -0.14%    +0.45%
 crown                                               
 Hungary               322.1500  322.3700    +0.07%    -0.33%
 forint                                              
 Polish                  4.2626    4.2600    -0.06%    +0.63%
 zloty                                               
 Romanian                4.7250    4.7262    +0.03%    -1.50%
 leu                                                 
 Croatian                7.4050    7.4053    +0.00%    +0.07%
 kuna                                                
 Serbian               117.8000  117.8700    +0.06%    +0.42%
 dinar                                               
 Note:      calculated from                1800 CET          
 daily                                               
 change                                              
                                                             
                       Latest    Previous  Daily     Change
                                 close     change    in 2019
 Prague                 1047.22  1051.570    -0.41%    +6.15%
                                        0            
 Budapest              40423.13  40764.49    -0.84%    +3.28%
 Warsaw                 2291.03   2276.60    +0.63%    +0.63%
 Bucharest              8542.17   8504.24    +0.45%   +15.69%
 Ljubljana               872.69    873.33    -0.07%    +8.51%
 Zagreb                 1900.49   1908.73    -0.43%    +8.67%
 Belgrade   <.BELEX15    718.70    722.89    -0.58%    -5.64%
            >                                        
 Sofia                   574.64    577.21    -0.45%    -3.33%
                       BONDS                                 
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
                                                     in
 Czech                                               spread
 Republic                                            
   2-year   <CZ2YT=RR    1.6090    0.0280   +233bps     +6bps
            >                                        
   5-year   <CZ5YT=RR    1.4930    0.0050   +215bps     +6bps
            >                                        
   10-year  <CZ10YT=R    1.6160    0.0160   +191bps     +6bps
            R>                                       
 Poland                                                      
   2-year   <PL2YT=RR    1.5720   -0.0280   +229bps     +1bps
            >                                        
   5-year   <PL5YT=RR    1.9400   -0.0470   +259bps     +0bps
            >                                        
   10-year  <PL10YT=R    2.3610   -0.0670   +265bps     -2bps
            R>                                       
            FORWARD    RATE      AGREEMEN                    
                                 T                   
                       3x6       6x9       9x12      3M
                                                     interban
                                                     k
 Czech Rep          <      2.16      2.08      1.98      2.17
            PRIBOR=>                                 
 Hungary            <      0.28      0.41      0.47      0.21
            BUBOR=>                                  
 Poland             <      1.72      1.70      1.67      1.72
            WIBOR=>                                  
 Note: FRA  are for ask prices                               
 quotes                                              
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 (Reporting by Alan Charlish, additional reporting by Jason
Hovet in Prague and Kristina Than in Budapest
Editing by Susan Fenton)
  
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