September 30, 2019 / 9:50 AM / 23 days ago

CEE MARKETS-Currencies gain as investors await Polish FX-mortgage verdict

    WARSAW, Sept 30 (Reuters) - Central European currencies
strengthened on Monday, at the beginning of a week when a
European Union court ruling could have serious implications for
Poland's financial markets.
    The European Court of Justice will rule on Thursday on
whether a bank in Poland broke the law by selling homeowners a
Swiss franc mortgage. The ruling could unleash lawsuits that 
wipe out Polish banking profits for years to come.
    "We approach the (zloty) supports at 4.37 and basically all
of the most interesting things are ahead of us on Oct. 3, so I
think the market is still in wait-and-see mode," said a
Warsaw-based currency trader. "There is a small wave of optimism
but no major moves."
    The Polish zloty was up 0.16% against the euro at
4.374. The Hungarian forint, the region's worst-
performing currency, strengthened 0.15% to 334.6. The Czech
crown gained 0.14% at 25.82.
    The forint was following the zloty in the absence of a
strong local story, a Budapest trader said, adding that the
broader direction was likely to be further weakening.
    PKO Bank Polski analysts said they expected the zloty to
weaken to 4.45 by the end of the week, saying the worst possible
verdict in the court case had not been priced in.
    Late on Friday, Fitch affirmed Poland at "A-" with a stable
outlook, as expected. 
    The agency pointed to Poland's "diversified economy, EU
membership, strong macroeconomic fundamentals and a sound policy
framework supported by a stable banking sector", but said it
expects the deficit to widen as the government increases social
spending.
    Polish bond yields ticked higher across the curve, with the
10-year paper trading 1.4 basis points higher at 
2.015%.
    "Polish  10Y  bond  yield  reached  2%  support  level  and 
we  expect  the  down  trend  might decelerate in the short
term," Santander Bank Polska analysts said in a note.
    "The uncertainty related to the impact of the ECJ verdict on
the Polish banks could weigh on the domestic bonds but the front
end could outperform thanks to the CPI release."
    Poland will release flash CPI data on Tuesday, with analysts
expecting year-on-year price growth to slow to 2.75% from 2.9%
in August, according to a Reuters poll.
    Czech 10-year yields rose 0.9 basis points to
1.349%
    Stocks were mostly lower, with benchmark indices in Warsaw
 and Budapest down 0.72% and 0.44% respectively.
    
            CEE        SNAPSHOT   AT                         
            MARKETS              1112 CET            
                       CURRENCI                              
                       ES                            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2019
 Czech                  25.8200   25.8550    +0.14%    -0.44%
 crown                                               
 Hungary               334.6000  335.1000    +0.15%    -4.04%
 forint                                              
 Polish                  4.3740    4.3810    +0.16%    -1.93%
 zloty                                               
 Romanian                4.7505    4.7539    +0.07%    -2.03%
 leu                                                 
 Croatian                7.4100    7.4095    -0.01%    +0.00%
 kuna                                                
 Serbian               117.4000  117.4800    +0.07%    +0.77%
 dinar                                               
 Note:      calculated from                1800 CET          
 daily                                               
 change                                              
                                                             
                       Latest    Previous  Daily     Change
                                 close     change    in 2019
 Prague                 1038.00  1038.450    -0.04%    +5.21%
                                        0            
 Budapest              40712.43  40890.74    -0.44%    +4.02%
 Warsaw                 2170.64   2186.31    -0.72%    -4.66%
 Bucharest              9606.06   9603.38    +0.03%   +30.10%
 Ljubljana               855.15    855.86    -0.08%    +6.33%
 Zagreb                 1970.28   1978.73    -0.43%   +12.66%
 Belgrade   <.BELEX15    750.61    755.41    -0.64%    -1.45%
            >                                        
 Sofia                   571.60    574.60    -0.52%    -3.85%
                       BONDS                                 
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
                                                     in
 Czech                                               spread
 Republic                                            
   2-year   <CZ2YT=RR    1.2960    0.0560   +205bps     +5bps
            >                                        
   5-year   <CZ5YT=RR    1.1020   -0.0890   +189bps    -10bps
            >                                        
   10-year  <CZ10YT=R    1.3490    0.0090   +190bps     -1bps
            R>                                       
 Poland                                                      
   2-year   <PL2YT=RR    1.5090    0.0130   +226bps     +1bps
            >                                        
   5-year   <PL5YT=RR    1.8080    0.0150   +259bps     +1bps
            >                                        
   10-year  <PL10YT=R    2.0150    0.0140   +257bps     -1bps
            R>                                       
            FORWARD    RATE      AGREEMEN                    
                                 T                   
                       3x6       6x9       9x12      3M
                                                     interban
                                                     k
 Czech Rep          <      2.16      2.09      2.13      2.16
            PRIBOR=>                                 
 Hungary            <      0.28      0.33      0.37      0.21
            BUBOR=>                                  
 Poland             <      1.73      1.70      1.67      1.72
            WIBOR=>                                  
 Note: FRA  are for ask prices                               
 quotes                                              
 **************************************************          
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 (Reporting by Alan Charlish in Warsaw and Marton Dunai in
Budapest)
  
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