January 25, 2019 / 10:47 AM / 6 months ago

CEE MARKETS-Currencies, bond yields ease slightly on dovish ECB

    * Dovish ECB comments weigh on CEE fx, yields, impact is
mild
    * Zloty is stablest for decades, yields down ahead of
auction
    * Leu drifts off record lows, Romanian shares fall further

    By Sandor Peto
    BUDAPEST, Jan 25 (Reuters) - Central European currencies and
government bond yields mostly eased somewhat on Friday after
dovish comments from the European Central Bank (ECB) decreased
the likelihood of monetary tightening across the region too.
    ECB President Mario Draghi's comments on Thursday expressing
concern over an economic slowdown in the euro zone reinforced
expectations that the bank will not start to increase interest
rates in the autumn, contrary to its earlier projection.
    The resulting dollar buying against the euro also weighed on
currencies in the European Union's eastern states, whose main
trade partner is the euro zone.
    The region's assets have been shielded by faster growth than
in western Europe, and in the case of Poland - the largest
eastern EU member by far - a stable monetary policy.
    The Polish central bank (NBP) has kept its main interest
rate at a record low 1.5 percent since 2015 and its governor,
Adam Glapinski, said earlier this month it could stay unchanged
until 2022.  
    A rise in Polish interest rates is now less likely than a
few months ago due to a lower inflation outlook, rate-setter
Lukasz Hardt said on Friday.
    The Polish zloty started to ease even before
Hardt's comments.
    It shed 0.2 percent by 0957 GMT, to trade at 4.2935.
    That level is still slightly firmer than the currency's
200-day moving average of 4.296.
    
    STABILITY
    The zloty has been the region's most stable currency in
recent months and its weekly volatility has been the lowest in
decades.
    "The weekly range of fluctuations is the lowest since June
1997," Santander Bank Polska analysts said in a note, adding
that it expected healthy demand at Poland's government bond
auction on Friday.     
    The Polish and Czech 10-year government bond yields tracked
safe-haven Bunds more closely in the past months than their more
volatile Hungarian and Romanian peers.
    The 10-year Polish bond traded at 2.7755 percent at 1012
GMT, lower by 4 basis points from Thursday, edging towards the
2-year lows set early this month at 2.71 percent.
    The yield on Hungarian government bonds dropped by 1-3 basis
points from levels before the ECB's conferences, with the
10-year paper trading at 2.83 percent.
    "(After the ECB's comments) it has become less credible that
the Hungarian central bank can and will start monetary
tightening in the near future," one Budapest-based fixed income
trader said.
    Romania's leu firmed 0.3 percent as the domestic
market reopened after a public holiday on Thursday.
    But it stayed near record lows, and a 1.1 percent fall in
Bucharest's main stock index also reflected the fact
that new taxes on the banking and energy sectors continue to
pressure Romanian markets. 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1057 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7200   25.7180    -0.01%    -0.05%
 crown      >                                       
 Hungary    <EURHUF=  318.4200  318.3000    -0.04%    +0.84%
 forint     >                                       
 Polish     <EURPLN=    4.2935    4.2865    -0.16%    -0.09%
 zloty      >                                       
 Romanian   <EURRON=    4.7675    4.7810    +0.28%    -2.38%
 leu        >                                       
 Croatian   <EURHRK=    7.4310    7.4325    +0.02%    -0.28%
 kuna       >                                       
 Serbian    <EURRSD=  118.3800  118.4800    +0.08%    -0.07%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1018.70  1017.700    +0.10%    +3.26%
                                       0            
 Budapest             40932.50  40890.94    +0.10%    +4.58%
 Warsaw                2400.77   2406.38    -0.23%    +5.45%
 Bucharest             7065.96   7141.56    -1.06%    -4.30%
 Ljubljana  <.SBITOP    832.90    837.87    -0.59%    +3.56%
            >                                       
 Zagreb                1757.86   1757.13    +0.04%    +0.52%
 Belgrade   <.BELEX1    697.46    701.41    -0.56%    -8.43%
            5>                                      
 Sofia                  576.91    573.57    +0.58%    -2.95%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7390   -0.0010   +232bps     -1bps
            R>                                      
   5-year   <CZ5YT=R    1.7040   -0.0020   +205bps     -2bps
            R>                                      
   10-year  <CZ10YT=    1.8620    0.0000   +168bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.3750   -0.0050   +196bps     -2bps
            R>                                      
   5-year   <PL5YT=R    2.1720   -0.0330   +252bps     -5bps
            R>                                      
   10-year  <PL10YT=    2.7950   -0.0150   +261bps     -2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.07      2.11      2.14      2.01
            <PRIBOR=                                
            >                                       
 Hungary                  0.28      0.49      0.73      0.00
                                                    
 Poland                   1.72      1.72      1.73      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
    
 (Reporting by Sandor Peto
Editing by Gareth Jones)
  
 
 
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