March 11, 2020 / 10:36 AM / 23 days ago

CEE MARKETS-Currencies stable, investors weigh potential cenbank moves

    By Anita Komuves
    BUDAPEST, March 11 (Reuters) - Central European currencies
were mostly stable and stock markets were mixed on Wednesday,
while investors maintained a cautious stance as European
governments stepped up measures to contain the spread of the
    Regional equities recouped some of the huge losses suffered
on Monday, when both the Budapest and Prague stock markets were
down more than 7%, their biggest drop since the 2008 global
financial crisis.
    Both Prague and Budapest gained more than 1% by
0842 GMT, while Bucharest and Warsaw lost 0.3%.
    Markets were reacting to the 50 bps rate cut announced by
the Bank of England and looking forward to the Thursday meeting
of the European Central Bank, expecting measures to ease the
economic fallout from the coronavirus outbreak.
    Regional central bank officials said they were assessing the
economic damage caused by the virus but sent mixed messages
about the need for rate cuts.  
    The Czech crown fell almost 1% on Tuesday after central bank
Governor Jiri Rusnok said he did not currently see a need to cut
interest rates. Earlier, another Czech central banker, Ales
Michl, said he would propose a 25 basis point cut. 
    In Poland, two rate-setters said this week that it was time
to consider a rate cut, while a third called for a wait-and-see
strategy before changing rates.
    "Commentary by some central banks from the region
highlighted the stark divergence between central bankers' views
of rate stability and the market's implied easing, which now
expects a cut from most countries in the region at their next
meeting," Morgan Stanley wrote in a note. 
    Among regional currencies, the forint gained 0.24%
on Wednesday, outperforming its peers. The Polish zloty
 climbed 0.12%, while the Czech crown and the Romanian
leu were trading stable.  
    The Hungarian forint has stayed fairly stable in the face of
the coronavirus panic, regaining some of its losses to the euro
after it hit a fresh record low of 340.60 two weeks ago. 
    There are several reasons for this, analysts say. Investors
are closing previously held carry-trade positions, which benefit
the forint. 
    "We have disappeared from the map. People who want to make
money are concentrating on other parts of the world now," a
dealer in Budapest said. 
    "There are still news stories about possible central bank
rate hikes in Hungary, and interbank rates have climbed up
somewhat, which keeps the forint steady. But this will melt
away," he added.
    The NBH is the most dovish in the region with its base rate
at 0.9%. The bank holds its next rate-setting meeting on March
    "Right now there is more volatility in bond markets. Yields
seesawed in the past few days, sometimes moving more than 10 bps
in a day," another trader in Budapest said. 
    Bond yields were reacting to international news and
movements in the U.S. bond market, he added.
    The Czech finance ministry will test markets with a raised
offer at its planned bond auctions on Wednesday, including
offering up to 7 billion crowns of a new bond due in 2031. 
Results of the auction will be published later on Wednesday.
    Dealers say bond trading has been relatively unaffected so
far amid market turmoil though spreads on the official MTS
platform have widened.
                   CEE      SNAPSHO   AT                      
                   MARKETS  T        0942              
                            Latest   Previou  Daily    Change
                            bid      close    change   in 2020
 EURCZK  Czech     <EURCZK  25.6400  25.6220   -0.07%   -0.81%
 =       crown     =>                                  
 EURHUF  Hungary   <EURHUF  335.080  335.900   +0.24%   -1.17%
 =       forint    =>             0        0           
 EURPLN  Polish    <EURPLN   4.3130   4.3182   +0.12%   -1.31%
 =       zloty     =>                                  
 EURRON  Romanian  <EURRON   4.8195   4.8229   +0.07%   -0.65%
 =       leu       =>                                  
 EURHRK  Croatian  <EURHRK   7.5620   7.5455   -0.22%   -1.54%
 =       kuna      =>                                  
 EURRSD  Serbian   <EURRSD  117.550  117.600   +0.04%   +0.02%
 =       dinar     =>             0        0           
         Note:     calculated from            1800            
         daily                                CET      
                            Latest   Previou  Daily    Change
                                     close    change   in 2020
 .PX     Prague              925.27  912.760   +1.37%  -17.06%
 .BUX    Budapest           38783.5  38380.6   +1.05%  -15.84%
                                  6        0           
 .WIG20  Warsaw    <.WIG20  1594.06  1599.48   -0.34%  -25.86%
 .BETI   Buchares           8697.15  8722.11   -0.29%  -12.83%
 .SBITO  Ljubljan  <.SBITO   857.82   843.94   +1.64%   -7.35%
 P       a         P>                                  
 .CRBEX  Zagreb    <.CRBEX  1651.16  1665.47   -0.86%  -18.16%
 .BELEX  Belgrade  <.BELEX   757.33   757.33   +0.00%   -5.53%
 15                15>                                 
 .SOFIX  Sofia     <.SOFIX   493.17   494.81   -0.33%  -13.20%
                            Yield    Yield    Spread   Daily
                            (bid)    change   vs Bund  change
         Czech                                         spread
 CZ2YT=    2-year  <CZ2YT=   1.8430   0.0000   +280bp    +0bps
 RR                RR>                              s  
 CZ5YT=    5-year  <CZ5YT=   1.1360  -0.1130   +206bp   -13bps
 RR                RR>                              s  
 CZ10YT            <CZ10YT   1.1320   0.0000   +189bp    -5bps
 =RR     10-year   =RR>                             s  
 PL2YT=    2-year  <PL2YT=   1.2050   0.0280   +216bp    +3bps
 RR                RR>                              s  
 PL5YT=    5-year  <PL5YT=   1.4010   0.0630   +233bp    +5bps
 RR                RR>                              s  
 PL10YT            <PL10YT   1.5920   0.0490   +235bp    +0bps
 =RR     10-year   =RR>                             s  
                            3x6      6x9      9x12     3M
         Czech     <CZKFRA     1.82     1.39     1.05     2.34
         Rep       ><PRIBO                             
         Hungary   <HUFFRA     0.71     0.72     0.70     0.69
         Poland    <PLNFRA     1.39     1.17     1.07     1.69
         Note:     are for ask                                
         FRA       prices                              

 (Additional reporting by Jason Hovet in Prague; Editing by
Sherry Jacob-Phillips)
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