May 6, 2020 / 10:36 AM / 19 days ago

CEE MARKETS-Forint outperforms on modest start of Hungarian QE, stocks mostly lower

    By Anita Komuves
    BUDAPEST, May 6 (Reuters) - The forint firmed half a percent
on Wednesday and outperformed its regional peers, helped by
relatively high Hungarian short-term market rates and the
National Bank of Hungary's slow start of its bond-buying
programme this week.
    The forint gained 0.43% on the day and traded at
348.35 versus the euro, recouping significant losses since it
hit an all-time low near 370 on April 1.
    Policy tightening by the previously ultra-dovish central
bank has helped shore up the currency, said Peter Virovacz, an
analyst at ING Bank. He added that Hungarian short-term market
rates were now relatively high in the region.
    The euro also weakened after a German constitutional court
ruled that the Bundesbank must stop buying government bonds if
the European Central Bank cannot prove those purchases are
needed, and this probably helped Central Europe's currencies to
firm, Virovacz said.
    The third factor supporting the forint was likely the NBH's
bond purchases on Tuesday at its first auction, which at
50 billion forints  ($154.50 million) came in below market
expectations.
    "At face value, what investors see is that this is not an
aggressive front-loaded programme and this probably has calmed
nerves," Virovacz said, adding that the central bank would
likely also buy government bonds this week on the secondary
market.
    "But I don't think this means the forint will head towards
340 now, I expect it to trade in a range between 350 and 355 in
the second quarter," he added.  
    "The global mood has worsened since yesterday, so it is
uncertain whether the forint can break the 350-level
permanently," CIB Bank analysts added in a client note.
    Elsewhere, Central European stocks and currencies were
looking for direction on Wednesday.     
    As countries are preparing for a gradual lifting of lockdown
measures introduced to curb the spread of the coronavirus, the
possibility of a new wave of infections and escalating
U.S.-China tensions still worry investors.
    Stock markets in Budapest and Prague eased
0.55% while Warsaw was down 1% by 0751 GMT. Bucharest's blue
chip index was up 0.9%.
    The Czech crown firmed 0.1% while the Polish zloty
 was stable at 4.5325 to the euro. 
    Poland's central bank should not have cut interest rates
earlier this year as the move contributed to the weakening of
the zloty, which is now undervalued, Polish rate-setter Kamil
Zubelewicz said in an interview.
    Manufacturing surveys (PMI) across central Europe on Monday
showed a grim picture, with manufacturing activity in Poland,
the Czech Republic and Hungary at or near record lows.

    BMW will delay the construction of its plant in Hungary as
part of cost-saving efforts, the company's CFO said on
Wednesday. 
    The Czech finance ministry will hold a government bond
auction later today as it ramps up borrowing to finance
emergency measures aimed to ease the economic effects of the
coronavirus pandemic.
    "MoF has already covered 90% of their financing needs," 
Komerční banka said in a client note. 
    "Assuming however the final deficit would match the latest
prediction of 300bln CZK this year, probably that number would
eventually be amended upward." 
            CEE        SNAPSHOT    AT                         
            MARKETS               0951 CET            
                       CURRENCIE                              
                       S                              
                       Latest     Previous  Daily     Change
                       bid        close     change    in 2020
 Czech                   27.0120   27.0420    +0.11%    -5.85%
 crown                                                
 Hungary                348.3500  349.8600    +0.43%    -4.94%
 forint                                               
 Polish                   4.5325    4.5315    -0.02%    -6.09%
 zloty                                                
 Romanian                 4.8220    4.8200    -0.04%    -0.70%
 leu                                                  
 Croatian                 7.5710    7.5735    +0.03%    -1.66%
 kuna                                                 
 Serbian                117.5100  117.5600    +0.04%    +0.05%
 dinar                                                
 Note:      calculated from                 1800 CET          
 daily                                                
 change                                               
                                                              
                       Latest     Previous  Daily     Change
                                  close     change    in 2020
 Prague                   871.53  876.3200    -0.55%   -21.88%
 Budapest               34415.81  34604.44    -0.55%   -25.32%
 Warsaw                  1583.86   1598.84    -0.94%   -26.34%
 Bucharest               8159.48   8090.58    +0.85%   -18.22%
 Ljubljana                796.90    796.68    +0.03%   -13.93%
 Zagreb                  1537.88   1537.55    +0.02%   -23.77%
 Belgrade   <.BELEX15     662.34    662.85    -0.08%   -17.38%
            >                                         
 Sofia                    448.37    448.37    +0.00%   -21.08%
                                                              
                       Yield      Yield     Spread    Daily
                       (bid)      change    vs Bund   change
                                                      in
 Czech                                                spread
 Republic                                             
   2-year   <CZ2YT=RR     0.3570   -0.1720   +114bps    -18bps
            >                                         
   5-year   <CZ5YT=RR     0.6430   -0.1580   +139bps    -18bps
            >                                         
   10-year  <CZ10YT=R     1.1650   -0.0390   +172bps     -6bps
            R>                                        
 Poland                                                       
   2-year   <PL2YT=RR     0.5160   -0.0120   +130bps     -2bps
            >                                         
   5-year   <PL5YT=RR     1.0490    0.0180   +180bps     +0bps
            >                                         
   10-year  <PL10YT=R     1.5440    0.0100   +210bps     -1bps
            R>                                        
            FORWARD                                           
                       3x6        6x9       9x12      3M
                                                      interban
                                                      k
 Czech Rep          <       0.29      0.29      0.33      0.90
            PRIBOR=>                                  
 Hungary            <       1.36      1.31      1.25      1.09
            BUBOR=>                                   
 Poland             <       0.29      0.30      0.30      0.68
            WIBOR=>                                   
 Note: FRA  are for ask prices                                
 quotes                                               
 ***************************************************          
 ***********                                          
 

($1 = 323.6300 forints)

 (Additional reporting by Jason Hovet in Prague; Editing by
Ramakrishnan M.)
  
 
 
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