June 17, 2019 / 9:06 AM / 5 months ago

CEE MARKETS-Assets little changed as investors eye Fed meeting

    By Marton Dunai
    BUDAPEST, June 17 (Reuters) - Emerging European assets were
little changed ahead of a week holding few local developments,
with local traders mostly eyeing a U.S. Federal Reserve meeting
on Wednesday, which is expected to give indirect clues to local
    A strengthening dollar can cause assets in more peripheral
markets to fall, and the Fed's reluctance to heed calls from
investors and President Donald Trump to cut rates can keep the
greenback on the strong side.
    The Fed, amid demands by Trump to cut interest rates, is
expected to leave borrowing costs unchanged but possibly lay the
groundwork for a rate cut later this year as more policymakers
could be open to cutting rates.
    If Fed comments confirm to investors that they have been too
optimistic about the timing of U.S. rate cuts, the dollar may
strengthen and U.S. bond yields rebound, potentially causing a
weakening of CEE currencies and bonds.
    Expectations concerning those factors will set the tone for
trade in the first days of next week.
    "Right now there's not a peep," a dealer said in Budapest.
"We'll keep our eyes peeled on the Fed and later this month on
local rate comments from the central bank."
    The Czech crown hung around a 9-month high, boosted by
comments from central bank board member Vojtech Benda, who told
Bloomberg last week that he would consider a June hike although
the bank itself has signalled rate stability ahead.
    "Positive expectations before the Fed has boosted the crown
to a certain degree. Hawkish comments from Benda could have also
played a certain role. However, if no one from the Governor's
inner circle joins him, it won't carry much weight for the June
meeting," CSOB said in a client note.
    Markets still price in a cut in the next year as the next
rate move.
    Stock markets were mixed, with the Budapest stock exchange
introducing a new bank stock for MKB, a bank formerly
in German hands that was nationalised and reorganised after the
crisis and expects to emerge from regulatory restrictions and
embark on a growth path.
    The bank has an initial market capitalisation of more than
197 billion forints ($685.24 million), making it the
sixth-largest stock on the exchange according to a statement.
    Romanian markets were closed for a holiday.
            CEE        SNAPSHOT   AT                         
            MARKETS              1013 CET            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2019
 Czech                  25.5410   25.5250    -0.06%    +0.65%
 Hungary               322.3000  322.0800    -0.07%    -0.38%
 Polish                  4.2594    4.2566    -0.07%    +0.71%
 Romanian                0.0000    4.7230    n/a       -1.45%
 Croatian                7.4040    7.4075    +0.05%    +0.08%
 Serbian               117.8000  117.9000    +0.08%    +0.42%
 Note:      calculated from                1800 CET          
                       Latest    Previous  Daily     Change
                                 close     change    in 2019
 Prague                 1053.96  1051.460    +0.24%    +6.83%
 Budapest              40827.26  40588.18    +0.59%    +4.31%
 Warsaw                 2279.07   2286.46    -0.32%    +0.11%
 Bucharest              8504.24   8504.24    +0.00%   +15.18%
 Ljubljana               872.41    871.72    +0.08%    +8.47%
 Zagreb                 1899.16   1899.83    -0.04%    +8.60%
 Belgrade   <.BELEX15    721.77    724.20    -0.34%    -5.24%
 Sofia                   580.93    578.00    +0.51%    -2.28%
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
 Czech                                               spread
   2-year   <CZ2YT=RR    1.6120    0.0280   +230bps     +2bps
   5-year   <CZ5YT=RR    1.5070    0.0070   +211bps     +1bps
   10-year  <CZ10YT=R    1.6020    0.0140   +185bps     +1bps
   2-year   <PL2YT=RR    1.6080    0.0320   +229bps     +3bps
   5-year   <PL5YT=RR    1.9710    0.0070   +257bps     +1bps
   10-year  <PL10YT=R    2.4100    0.0100   +266bps     +1bps
            FORWARD    RATE      AGREEMEN                    
                       3x6       6x9       9x12      3M
 Czech Rep          <      2.16      2.06      1.97      2.17
 Hungary            <      0.29      0.44      0.57      0.18
 Poland             <      1.73      1.73      1.70      1.72
 Note: FRA  are for ask prices                               
 (Additional reporting by Jason Hovet in PRAGUE;
Editing by Alison Williams)
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