November 29, 2018 / 10:18 AM / 8 months ago

CEE MARKETS-Assets rise on Fed comments ahead of Polish switch auction

    * Fed Chair's hints at fewer rate hikes helps CEE assets
    * Forint leads currency gains, Warsaw biggest equities
    * Scarce supply adds support to Polish, Hungarian bonds

    By Sandor Peto and Alicja Ptak
    BUDAPEST, Nov 29 (Reuters) - Central European assets gained
on Thursday after Federal Reserve Chair Jerome Powell hinted the
central bank would raise interest rates less than markets had
    A slowdown in U.S. rate increases and less capital flowing
into the dollar make assets more attractive in emerging markets,
including the fast-growing economies in the European Union's
eastern wing.
    In regional currency markets, the forint led
gains, gaining a third of a percent to 323.02 versus the euro by
0915 GMT. The zloty, which outperformed the forint in
recent days, was steady near three-week highs at 4.2905 against
the euro.
    Polish assets have been recovering from losses caused by a
corruption scandal that forced the head of financial market
regulator KNF to quit. Worries over the scandal's effect on
Polish banks have eased, and Polish assets got additional
support from legislation that reversed legal changes to the
Supreme Court that he European Union objected to.
    Warsaw led a rise of regional equities, with its blue-chip
index gaining 1.2 percent, getting near its highest
levels since early October.
    Poland's 10-year government bond yield fell 4
basis points to 3.135 percent, a one-month low, and Hungarian
bond yields also traded in multi-month-low regions.
    Polish and Hungarian bond prices also got support from a
drop in the financing needs of their governments at the end of
the year.
    A pick-up in EU fund inflows have helped Hungarian bond
yields to fall in recent weeks. So has an easing of inflation
worries as oil prices retreated.
    Poland's government decided earlier this week to hold a bond
switch tender on Thursday instead of a simple sale tender, after
the state budget posted a surplus in October. It said the only
remaining tender of 2018 may be a switch tender, too.
    Scarce supply continues to support Polish bonds, Raiffeisen
analyst Stephan Imre said in a note.
    The zloty's appreciation potential made Raiffeisen maintain
its mildly bullish view on long-end Polish government bonds,
Imre added.
    Poland will be the first in the region to publish November
inflation figures, on Friday. Analysts expect its annual
inflation rate, which ran at 1.7 percent in October, to stay
well below 2.5 percent, the middle of the central bank's target
            CEE       SNAPSHOT   AT                         
            MARKETS             1015 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.9450   25.9700    +0.10%    -1.55%
 crown      >                                       
 Hungary    <EURHUF=  323.0200  324.0500    +0.32%    -3.75%
 forint     >                                       
 Polish     <EURPLN=    4.2905    4.2900    -0.01%    -2.66%
 zloty      >                                       
 Romanian   <EURRON=    4.6560    4.6541    -0.04%    +0.51%
 leu        >                                       
 Croatian   <EURHRK=    7.4160    7.4155    -0.01%    +0.19%
 kuna       >                                       
 Serbian    <EURRSD=  118.2500  118.3900    +0.12%    +0.21%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1061.49  1065.300    -0.36%    -1.55%
 Budapest             39783.76  39656.25    +0.32%    +1.03%
 Warsaw                2290.47   2264.51    +1.15%    -6.94%
 Bucharest             8593.03   8578.29    +0.17%   +10.82%
 Ljubljana  <.SBITOP    817.79    822.58    -0.58%    +1.41%
 Zagreb                1727.73   1725.84    +0.11%    -6.25%
 Belgrade   <.BELEX1    742.39    742.78    -0.05%    -2.29%
 Sofia                  587.25    584.72    +0.43%   -13.31%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.7280    0.1020   +232bps    +12bps
   5-year   <CZ5YT=R    1.8470    0.0250   +210bps     +4bps
   10-year  <CZ10YT=    2.0830    0.0160   +176bps     +4bps
   2-year   <PL2YT=R    1.5520   -0.0160   +215bps     +0bps
   5-year   <PL5YT=R    2.5720   -0.0310   +283bps     -1bps
   10-year  <PL10YT=    3.1410   -0.0310   +282bps     -1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.19      2.32      2.38      2.02
 Hungary                  0.30      0.50      0.80      0.13
 Poland                   1.77      1.81      1.86      1.72
 Note: FRA  are for ask prices                              
 (Additional reporting by Luiza Ilie in Bucharest, editing by
Larry King)
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