CEE MARKETS 2-Slovenian assets rise on bond sale, currencies ease

Tue Apr 1, 2014 12:11pm EDT

Related Topics

* PMIs show recovery slowing, currencies ease slightly
    * Slovenia's international bond sale draws strong demand
    * Slovenia 10-yr domestic bond yield falls to 42-month low

    By Sandor Peto
    BUDAPEST, April 1 (Reuters) - Slovenia, which narrowly
escaped a bailout last year, led a rise of stocks and bonds in
Central Europe on Tuesday after selling bonds worth 2 billion
euros on the international market.
    The region's currencies, meanwhile, eased slightly after
business surveys showed a slowdown in economic recovery in
Poland, the Czech Republic and Hungary.
    The yield of Slovenia's domestic 10-year bonds 
dropped to 42-month lows at 3.576 percent, after the
international bond issue drew heavy demand, worth 9.5 billion
euros.  
    Slovenia's budget deficit soared to almost 15 percent of
economic output last year after it recapitalised its troubled
banks without help from abroad. 
    The deficit could shrink in 2014, but Slovenia's state debt
could rise to around 80 percent of economic output this year,
the level of Hungary, which has Central Europe's highest debt.
    Slovenia's blue chip SBI index reversed an early
decline and rose by over 1 percent, boosted by the bond issue
and driven by gains of the largest listed firm, drugs producer
Krka.
    "The yield on the new bonds is relatively low so the issue
was successful from that point of view," said Saso Stanovnik,
chief economist of investment firm Alta Invest.
    "But the danger is that there will now be less pressure on
the government to pursue the necessary reforms which include the
reform of the national health system, reducing labour costs,
rationalising the public sector and privatising state firms."
    Other stocks in the region rose after mild early falls,
joining a rise in Western European bourses. Prague's main equity
index firmed one percent, Budapest gained 0.7
percent and Warsaw rose 0.4 percent.
    Polish, Hungarian and Czech government bond yields dropped
by a few basis points.  
        
    CURRENCIES EASE
    Slovenia and other successor states of former Yugoslavia
still struggle to cut deficits and a bloated state sector, while
Central European states north of them have more stable finances.
    Relative stability and the prospect of a regional recovery
have mostly protected assets against wobbles in other emerging
economies in the past months, but the crisis in neighbouring
Ukraine and its conflict with Russia has heightened concerns
about the possible impact on markets.
    The worries have eased in the past two weeks, but analysts
said they probably had a impact on business sentiment.
    All of the region's currencies eased about 0.1 percent
against the euro, after Polish, Czech and Hungarian purchasing
manager index (PMI) figures, which measure sentiment in
manufacturing, showed a slowdown in economic recovery in March.
    The data, however, still showed the region's economies were
growing.
    Dealers and analysts said the recovery could continue to
give support to the region's currencies if the Ukrainian crisis
did not escalate.
    "It is true: the PMIs retreated slightly, but that was not a
huge surprise," one Budapest-based currency dealer said.
"Probably profit-taking (after gains in the past weeks) caused
the currency easing rather than concern over the PMI figures."  
 
                      CEE MARKETS SNAPSHOT AT 1704 CET
 ************************** CURRENCIES ************************
                             Latest  Previous   Daily   Change
                             bid     close      change  in 2014
 Czech crown                 27.459    27.446   -0.05%  -0.46%
 Hungarian forint           307.260   307.120   -0.05%  -3.35%
 Polish zloty                 4.175     4.169    -0.15%  -0.61%
 Romanian leu                 4.461     4.458   -0.06%   -0.02%
 Croatian kuna                7.649     7.644    -0.07%  -0.41%
 Serbian dinar              115.400   115.270    -0.11%   -0.78%
 Note: daily change calculated from previous close at 1700 GMT
 **************************** STOCKS **************************
                             Latest  Previous   Daily   Change
                                     close      change  in 2014
 Prague                      1016.78    1006.45  +1.03% +3.03%
 Budapest                  17623.28  17529.99   +0.53%   -3.88%
 Warsaw                     2462.77   2462.47   +0.01% +2.43%
 Bucharest                  6359.05   6323.74  +0.56%   -1.84%
 ***************************** BONDS **************************
                         Yield    Yield    Spread    Daily
                         (bid)    change   vs Bund   change in
 Czech Republic                                      spread
   2-year                0.339    -0.056   +15bps     -8bps
   5-year                1.117     -0.002   +47bps      -2bps
  10-year                2.209    -0.001   +63bps     -1bps
 Hungary
   3-year                4.550    +0.010   +429bps    -1bps
   5-year                4.780     -0.050   +413bps    -7bps
  10-year                5.550    -0.030    +397bps    -4bps
 Poland
   2-year                3.050    -0.010    +287bps    -3bps
   5-year                3.520    -0.030    +287bps    -5bps
  10-year                4.210   -0.010    +263bps    -2bps
 ******************* FORWARD RATE AGREEMENTS ******************
                              3x6     6x9    9x12  3M interbank
 Czech Rep                    0.400   0.390  0.500   0.37
 Hungary                      2.820   3.000  3.210   2.68
 Poland                       2.725   2.745  2.850   2.71
 Note: FRA quotes are for ask prices
 **************************************************************
 
 (Additional reporting by Michal Janusz in Warsaw, Marja Novak
in Ljubljana; Editing by Alison Williams)
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