March 14, 2019 / 10:43 AM / 5 months ago

CEE MARKETS-Leu jumps from 6-week lows, tax debate stays in focus

    * Leu firms, central bank may have intervened -dealers
    * Investors watch how Romanian government will alter new
    * Currencies mixed, British Brexit vote watched closely
    * Polish central bank sometimes intervenes, its chief says

    By Sandor Peto and Luiza Ilie
    BUDAPEST/BUCHAREST, March 14 (Reuters) - The leu
jumped on Thursday, rebounding from 6-week lows set late in the
previous session, in what market participants said was possible
intervention by Romania's central bank.
    Romanian asset prices has been jittery in the past three
months since the government announced new taxes on various
business sectors including banks.
    The government is expected to work out changes to the levies
by next week to prevent a downgrade of its credit rating outlook
to negative from stable by Standard & Poor's.
    The leu firmed a quarter of a percent against the
euro through the 4.77 psychological line, to trade at 4.768 at
0930 GMT, off Wednesday's 6-week lows at 4.78. 
    The Romanian central bank has a track record of managing the
currency in the market sometimes. One Bucharest-based dealer
said the central bank was probably behind the leu's rebound.
    "The historically high turnover (on Wednesday) is supporting
the idea of official offers coming in to protect the Romanian
leu," Bucharest-based ING Bank analysts said in a note.
    Romania's overnight ROBOR interbank interest rate
 was bid at 1.41 percent, unchanged from Wednesday
and still near 3-month lows.
    Given the uncertainty over S&P's rating, an auction of
5-year Romanian bonds on Thursday "seems to have come at the
wrong time", but the government could sell the full amount if it
allows some rise in the yield, the ING note added.
    The yield on the 5-year benchmark Romanian bond
was bid higher by 8 basis points in the secondary market to 4.33
    Hungarian yields rose 2-3 basis points ahead of the
government's auction on Thursday as the market digests a rise in
the sale at the bi-weekly auctions to above 100 billion forints 
($359.69 million), one trader said.
    Regional currencies were mixed as investors were looking at
the impact of the third British parliamentary vote this week
concerning its planned exit from the European Union, this time
on whether to delay the March 29 deadline.  
    The forint firmed slightly, trading near
Wednesday's 10-month highs amid expectations that the Hungarian
central bank will start to tighten policy at its meeting on
March 26.
    Poland's zloty eased a touch, but remained stuck
at the 4.3 psychological line versus the euro.
    Polish central bank governor Adam Glapinski said the bank
has sometimes intervened in the foreign exchange market but
these interventions have been limited.
    DM TMS Brokers analyst Konrad Bialas said the stability of
Poland's economy and monetary policy had kept the zloty very
stable in the past months, rather than interventions.   
            CEE       SNAPSHOT   AT                         
            MARKETS             1030 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6670   25.6520    -0.06%    +0.16%
 crown      >                                       
 Hungary    <EURHUF=  314.5000  314.8500    +0.11%    +2.09%
 forint     >                                       
 Polish     <EURPLN=    4.3020    4.3005    -0.03%    -0.29%
 zloty      >                                       
 Romanian   <EURRON=    4.7680    4.7799    +0.25%    -2.39%
 leu        >                                       
 Croatian   <EURHRK=    7.4195    7.4163    -0.04%    -0.13%
 kuna       >                                       
 Serbian    <EURRSD=  118.0500  118.1900    +0.12%    +0.21%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1069.57  1061.630    +0.75%    +8.41%
 Budapest             41120.43  40887.58    +0.57%    +5.06%
 Warsaw                2322.01   2314.79    +0.31%    +1.99%
 Bucharest             7885.83   7857.52    +0.36%    +6.80%
 Ljubljana  <.SBITOP    872.67    874.53    -0.21%    +8.51%
 Zagreb                1769.51   1767.34    +0.12%    +1.18%
 Belgrade   <.BELEX1    700.17    705.47    -0.75%    -8.08%
 Sofia                  578.91    578.77    +0.02%    -2.62%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.8740    0.0730   +241bps     +6bps
   5-year   <CZ5YT=R    1.7910    0.0050   +217bps     -1bps
   10-year  <CZ10YT=    1.9050    0.0120   +183bps     +0bps
   2-year   <PL2YT=R    1.6360   -0.0850   +217bps    -10bps
   5-year   <PL5YT=R    2.2360    0.0120   +261bps     +0bps
   10-year  <PL10YT=    2.8900    0.0250   +281bps     +1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.21      2.26      2.28      2.03
 Hungary                  0.41      0.61      0.81      0.14
 Poland                   1.74      1.74      1.74      1.72
 Note: FRA  are for ask prices                              
 ($1 = 278.0200 forints)

 (Editing by Mark Heinrich)
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