CEE MARKETS 3-Romania's assets surge on JPMorgan index move

Wed Jan 16, 2013 10:56am EST

* Inclusion in JPMorgan's debt index boost Romanian bonds
    * Leu hits one-year high, Romanian yields at record lows
    * Verbal interventions, expected rate cuts pressure zloty

    By Sam Cage and Karolina Slowikowska
    BUCHAREST/WARSAW, Jan 16 (Reuters) - Romanian bond yields
fell to record lows on Wednesday and the leu hit a one-year high
after JPMorgan included the country's debt in its
emerging market index.
    The news pushed Romanian yields 15 basis points lower. It
and a similar move by Barclays in November should increase the
pool of investors and increase liquidity in the small market.
    Yields on Romania's five-year bonds were down to about
5.5-5.6 percent, the lowest level since 1989.
    "Because of Romania's inclusion in JPMorgan's index, the
secondary market will see a boost together with foreign investor
interest," said a Bucharest dealer.
    Bond yields have already fallen by up to 50 basis points
along the curve since the December 9 election, which calmed
unease over the country's governance and political stability,
and more strength is expected ahead. 
    "We expect the rally to continue, due to a convergence
trade, a realignment of local rates, support from inclusion in
the local bond indices and reasonable fundamentals," said
UniCredit analyst Dan Bucsa.
    The Romanian leu also drew support from JPMorgan's move,
outperforming other currencies in the region, which are under
pressure from verbal interventions and expected rate cuts ahead.
    At 1430 GMT, the leu traded at 4.32 against the
euro, its highest level since January 2012.
    Elsewhere in the region, the Hungarian forint and Poland's
zloty, which have all lost more than 1 percent in January on the
prospect of lower interest rates and official comments seeking
to weaken currencies, fell on Wednesday.
    The forint led the region's losses, also hit by
expectations that a soon-to-be-appointed new central bank
governor will flood the economy with cheap credit using
unconventional tools 
    The forint shed 0.5 percent against the euro.
    The zloty was down 0.4 percent against the euro,
under pressure from finance ministry officials who have been
highlighting threats from the strong currency to the slowing
economy. 
    Expectations that Friday's industrial output data may
disappoint also undermined the zloty, dealers said. Analysts
polled by Reuters forecast a 7 percent annual drop in output in
December. 
     The Czech crown was relatively stable on
Wednesday.
--------------------------MARKET SNAPSHOT--------------------
 Currency                    Latest   Previous Local    Local
                                      close    currency currency
                                               change   change
                                               today    in 2013 
 Czech crown                  25.576    25.565   -0.04%    -2.06%
 Polish zloty                 4.126    4.114   -0.29%    -1.26%
 Hungarian forint             295.13    293.82   -0.44%    -1.41%
 Croatian kuna                7.558    7.56  +0.03%    -0.09%
 Romanian leu                 4.328    4.341  +0.3%   +2.66%
 Serbian dinar                112.11    111.9   -0.19%   +0.17%
 Yield Spreads
 Czech treasury bonds           
 2-yr T-bond   CZ2YT=RR    -12 basis points to  2bps over bmk*
 7-yr T-bond   CZ7YT=RR   +1 basis points to  +53bps over bmk*
 10-yr T-bond   CZ9YT=RR   +4 basis points to  +115bps over bmk*
 Polish treasury bonds           
 2-yr T-bond   PL2YT=RR   +2 basis points to  +325bps over bmk*
 5-yr T-bond   PL5YT=RR   +4 basis points to  +305bps over bmk*
 10-yr T-bond PL10YT=RR   +3 basis points to  +255bps over bmk*
 The Hungarian treasury bonds           
 3-yr T-bond   HU3YT=RR   +1 basis points to  +530bps over bmk*
 5-yr T-bond   HU5YT=RR   +5 basis points to  +521bps over bmk*
 10-yr T-bond   HU10YT=RR +7 basis points to  +470bps over bmk*
 
*Benchmark is German bond equivalent.
All data taken from Reuters at 1438 CET.
Currency percent change calculated from the daily domestic 
close at 1700 GMT.
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