October 26, 2017 / 8:57 AM / a month ago

CEE MARKETS-Currencies ease on fear of big ECB asset buying cut

    * Forint leads currency easing, weakest in more than two
weeks
    * Concerns is ECB may cut asset buying by more than expected
    * Crown firming could continue after hiccup on rate hike
bets

    By Sandor Peto and Robert Muller
    BUDAPEST/PRAGUE, Oct 26 (Reuters) - Central European
currencies and government bonds eased slightly amid some worries
that the European Central Bank (ECB) may signal faster than
expected cuts in its asset buying programme on Thursday.
    The asset buying in the euro zone has indirectly helped
currencies and government bonds in the European Union's eastern
members, too.
    According to a Reuters poll of economist, the ECB will say
that it will start trimming the purchases to 40 billion euros
from 60 billion euros in January.
    The yield on some Hungarian and Polish government bonds rose
by 2-3 basis points, with Poland's 10-year bonds trading at
3.437, the highest level since Oct. 10.
    In currency markets, the forint led the weakening,
and touched its weakest levels in more than two weeks against
the euro.
    It shed 0.2 percent, to trade at 311 at 0812 GMT, and
technical factors have opened the way for it towards 312, Erste
analysts said in a note.
    "All eyes are on the ECB, and euro zone economic figures
have moved expectations towards a hawkish message," one
Budapest-based fixed income trader said.
    "The dovish policy of the Hungarian central bank is keeping
yields here down... The question is whether ammunition remains
for the bank if (ECB chief Mario) Draghi is hawkish today," the
trader added.
    The zloty and the Czech crown eased 0.1
percent against the euro, while the leu got stuck at the 4.6
line which some market participants believe is defended by the
central bank.
    The crown retreated after a rally which boosted it to
four-year highs earlier this week, supported by hawkish comments
from Czech central bank (CNB) rate setters.
    The comments from Vice-Governor Mojmir Hampl and rate setter
Tomas Nidetzky underpinned expectations that the CNB will
continue to increase its interest rates at its meeting on Nov.
2, and will indicate that more tightening will come.

    The crown's strengthening can continue, market participants
said.
    "It seems the CNB is still counting on the overboughtness of
the crown and therefore it won't have to constrain its policy
tightening with regards to the cautious ECB," CSOB analysts said
in a note.
    Equities were mostly rangebound in the region.
    The key exception was Polish refiner Lotos which
gained 6 percent after reporting 63 percent surge in
third-quarter net profit.
    
               CEE MARKETS    SNAPSHOT  AT                  
                                          1012 CET          
                              CURRENCIES                    
                              Latest    Previous  Daily     Change
                              bid       close     change    in 2017
 Czech crown                  25.6470   25.6200   -0.11%    5.30%
 Hungary                      311.0000  310.3100  -0.22%    -0.70%
 forint                                                     
 Polish zloty                 4.2451    4.2427    -0.06%    3.74%
 Romanian leu                 4.5985    4.5985    +0.00%    -1.38%
 Croatian                     7.5145    7.5155    +0.01%    0.54%
 kuna                                                       
 Serbian                      119.3000  119.5700  +0.23%    3.39%
 dinar                                                      
 Note: daily   calculated     previous  close at  1800 CET  
 change        from                                         
                              STOCKS                        
                              Latest    Previous  Daily     Change
                                        close     change    in 2017
 Prague                       1060.48   1064.10   -0.34%    +15.07%
 Budapest                     39724.33  39840.92  -0.29%    +24.13%
 Warsaw                       2461.76   2449.89   +0.48%    +26.38%
 Bucharest                    7888.93   7880.70   +0.10%    +11.35%
 Ljubljana                    803.62    804.82    -0.15%    +11.99%
 Zagreb                       1886.01   1883.42   +0.14%    -5.46%
 Belgrade                     728.19    727.55    +0.09%    +1.51%
 Sofia                        653.97    654.37    -0.06%    +11.52%
                              BONDS                         
                              Yield     Yield     Spread    Daily
                              (bid)     change    vs Bund   change in
 Czech                                                      spread
 Republic                                                   
 2-year                       0.382     0.154     +109bps   +15bps
 5-year                       0.83      0.004     +108bps   +0bps
 10-year                      1.706     0.008     +122bps   +1bps
 Poland                                                     
 2-year                       1.661     -0.015    +237bps   -2bps
 5-year                       2.708     0.01      +296bps   +1bps
 10-year                      3.443     0.015     +296bps   +1bps
               FORWARD        RATE      AGREEMENT           
                              3x6       6x9       9x12      3M interbank
 Czech Rep             <PRIB  0.89      1.08      1.23      0
               OR=>                                         
 Hungary               <BUBO  0.075     0.105     0.14      0.03
               R=>                                          
 Poland                <WIBO  1.7775    1.855     1.93      1.73
               R=>                                          
 Note: FRA     are for ask                                  
 quotes        prices                                       
 **************************************************************
 
 (Additional reporting by Agnieszka Barteczko in Warsaw; Editing
by Toby Chopra)
  
 
 

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