April 6, 2018 / 9:25 AM / 8 months ago

CEE MARKETS-Forint underperforms, Orban seen winning re-election

    * Stocks rebound from early fall on US-China trade war fear
    * Orban seen winning third term, failure would upset markets
    * Crown shrugs off breakdown of Czech coalition talks

 (Adds new prices and trader comment)
    By Sandor Peto
    BUDAPEST, April 6 (Reuters) - Hungarian assets eased on
Friday, underperforming their Central European peers, amid some
low-scale positioning ahead of Sunday's parliamentary elections
in Hungary.
    Prime Minister Viktor Orban is expected to win a third term
in one of the bloc's most closely-watched elections.
    Orban is a leader of Central Europe's resistance to the EU's
migrant quotas and French-German ambitions to deepen the bloc's
integration. Pollsters see a slim chance that the fragmented
opposition could drive Orban out of power.
    That would make Hungary's economic and monetary policy
outlook uncertain, and provide an unpriced big upset to markets.
    Hungarian government bond yields, which have been kept low
by unorthodox measures from the central bank led by an Orban
ally, rose by two basis points, with 10-year bonds trading at
2.53 percent at 1237 GMT.
    But trade was thin, and the selling of 2038-expiry bonds by
one investor probably caused the rise rather than worries over
the election, one Budapest-based trader said.
    "People are just waiting to get over this (election)
finally," the trader added.
    The forint drifted off Thursday's 16-day highs against the
euro and was trading at 312.30 at 1300 GMT.
    It weakened 0.3 percent from Thursday, while the region's
other main currencies hardly moved. Attempts to push it towards
a one-month low beyond 313.25 lacked vigour.
    Central European equities fell in early trade, led by
Budapest as an escalating U.S.-China trade war cut risk
appetite, but almost fully recovered in afternoon trade.
    Budapest's bluechip index was down 0.1 percent at
1300 GMT, while Prague shed a quarter of a percent.
    Hungarian and Czech industrial output growth slowed in
February, according to data released early on Friday, reflecting
a fall in Germany, the region's key trade partner.
    But output growth is expected to remain strong.
    A minor weakening of the Czech crown confirmed
that the country's markets mostly shrug off political jitters.
    Government coalition talks between the ANO party of Prime
Minister Andrej Babis and the Czech Social Democratic party
broke down late on Thursday.
    The Czech central bank said in the minutes of its March 
meeting that risks to its forecasts were slightly
    It is still expected to continue to deliver one more
interest rate hike this year, in August or September, to fight
inflation, Erste analysts Jiri Polansky and Jan Zemlicka said.
    The crown is seen strengthening more than 2 percent against
the euro over the next year, outperforming regional peers, a
Reuters poll of analysts showed on Friday.  
    Some markets in the region, including Romania, are closed on
Friday and Monday due to the Orthodox Easter.
            CEE       SNAPSHOT   AT                         
            MARKETS             1500 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.3570   25.3470    -0.04%    +0.73%
 crown      >                                       
 Hungary    <EURHUF=  312.3000  311.4500    -0.27%    -0.44%
 forint     >                                       
 Polish     <EURPLN=    4.1960    4.1976    +0.04%    -0.47%
 zloty      >                                       
 Romanian   <EURRON=    4.6630    4.6640    +0.02%    +0.36%
 leu        >                                       
 Croatian   <EURHRK=    7.4250    7.4303    +0.07%    +0.07%
 kuna       >                                       
 Serbian    <EURRSD=  118.0100  118.1700    +0.14%    +0.42%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1127.63  1130.230    -0.23%    +4.59%
 Budapest             38034.46  38065.04    -0.08%    -3.41%
 Warsaw                2244.34   2243.58    +0.03%    -8.81%
 Ljubljana  <.SBITOP    823.66    823.90    -0.03%    +2.14%
 Zagreb                1802.34   1806.05    -0.21%    -2.20%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    0.7580   -0.1070   +134bps    -10bps
   5-year   <CZ5YT=R    1.2370    0.0060   +134bps     +3bps
   10-year  <CZ10YT=    1.8580    0.0020   +135bps     +2bps
   2-year   <PL2YT=R    1.4990    0.0080   +208bps     +2bps
   5-year   <PL5YT=R    2.3200   -0.0210   +242bps     +0bps
   10-year  <PL10YT=    3.0980   -0.0150   +259bps     +0bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                0.95      1.06      1.22      0.90
 Hungary                  0.09      0.10      0.20      0.03
 Poland                   1.73      1.74      1.78      1.70
 Note: FRA  are for ask prices                              

 (Reporting by Sandor Peto
Editing by Andrew Roche)
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