Bonds News

CEE MARKETS-Zloty hits 13-month low as CEE growth slows

    * Poland, Hungary, Romania grow strongly in Q2 despite
    * Czech Republic, Slovakia slowing faster as trade bites
    * Currencies stuck on weak footing, stocks down

    By Jason Hovet
    PRAGUE, Aug 14 (Reuters) - The Polish zloty fell
to a 13-month low on Wednesday, drifting weaker in light trading
as data showed the euro zone's slowdown starting to put the
brakes on central Europe's faster growing economies.
    The region has continued to post solid growth as low
domestic interest rates and wage growth fuel domestic demand and
mitigate the effects of a slowdown in western European trading
partners that is taking a toll particularly on the Czech
Republic and also now Slovakia.
    But signs of central European economies starting to cool
more added to poor market sentiment in the region, which has
worsened this month amid growing global trade fears.
    On Wednesday, the zloty lost 0.4% to bid at 4.353
to the euro by 0944 GMT and the Czech crown fell 0.1%
to 25.851, also just off a 2-1/2 month low. 
    "We saw some risk-off flows yesterday and this week, so the
zloty is just losing most, I guess, because of the proximity of
the year's (low)," a Warsaw-based dealer said, adding low
liquidity just before a local holiday was helping to exaggerate
    Polish growth has been more immune to western European
troubles. The economy expanded 4.4% year-on-year in the second
quarter, down from 4.7% in the previous quarter.
    Analysts, though, expect Poland and Hungary - where
second-quarter growth eased to 4.9% from a 15-year high of 5.3%
- to slow in the coming quarters as external demand woes become
a bigger factor, which has been signaled by manufacturing
surveys in recent months.
    Romania, which like Hungary, has seen a construction boom,
grew 4.4% year-on-year last quarter.
    The Hungarian forint and Romania's leu
dipped nearly 0.1% on Wednesday.
    "So far, domestic demand has offset headwinds from the
euro-zone," Capital Economics economist Liam Peach said. 
    "But there were signs towards the end of Q2 that export
weakness was taking a heavier toll, particularly in Poland. 
    "With the manufacturing PMIs for July falling sharply and
Germany's industrial recession intensifying in June, we expect
the weak external backdrop to take a bigger toll on regional
growth over the rest of 2019."
    Germany's economy posted a quarterly contraction in the
April-June period, data on Wednesday showed. That bodes poorly
for countries like the Czech Republic and Slovakia that are
highly linked to the German car industry.
    Slovakia's second-quarter growth widely missed the mark,
according to data on Wednesday, with growth 1.9% year-on-year,
well below a Reuters poll forecast of 3.3%. In the Czech
Republic, where growth was clicking along above 4% just a year
ago, the economy expanded by 2.7% in the last quarter.
    Stock markets in the region mostly slipped, led by a 0.9%
drop in Budapest. A jump in software security firm Avast
 after strong quarterly earnings on Wednesday
boosted Prague's PX index.
                   CEE      SNAPSHO   AT                      
                   MARKETS  T        1143              
                            Latest   Previou  Daily    Change
                            bid      close    change   in 2019
 EURCZK  Czech     <EURCZK  25.8510  25.8285   -0.09%   -0.56%
 =       crown     =>                                  
 EURHUF  Hungary   <EURHUF  323.420  323.230   -0.06%   -0.72%
 =       forint    =>             0        0           
 EURPLN  Polish    <EURPLN   4.3530   4.3351   -0.41%   -1.46%
 =       zloty     =>                                  
 EURRON  Romanian  <EURRON   4.7215   4.7200   -0.03%   -1.43%
 =       leu       =>                                  
 EURHRK  Croatian  <EURHRK   7.3880   7.3900   +0.03%   +0.30%
 =       kuna      =>                                  
 EURRSD  Serbian   <EURRSD  117.680  117.730   +0.04%   +0.53%
 =       dinar     =>             0        0           
         Note:     calculated from            1800            
         daily                                CET      
         change Latest   Previou  Daily    Change
                                     close    change   in 2019
 .PX     Prague             1035.52  1030.29   +0.51%   +4.96%
 .BUX    Budapest           40290.1  40722.3   -1.06%   +2.94%
                                  9        6           
 .WIG20  Warsaw    <.WIG20  2103.31  2140.19   -1.72%   -7.61%
 .BETI   Buchares           9134.21  9115.80   +0.20%   +23.71
         t                                                   %
 .SBITO  Ljubljan  <.SBITO   862.86   861.34   +0.18%   +7.29%
 P       a         P>                                  
 .CRBEX  Zagreb    <.CRBEX  1893.16  1885.68   +0.40%   +8.25%
 .BELEX  Belgrade  <.BELEX   739.14   746.15   -0.94%   -2.96%
 15                15>                                 
 .SOFIX  Sofia     <.SOFIX   582.39   582.16   +0.04%   -2.03%
                            Yield    Yield    Spread   Daily
                            (bid)    change   vs Bund  change
         Czech                                         spread
 CZ2YT=    2-year  <CZ2YT=   1.0350   0.0010   +191bp    -1bps
 RR                RR>                              s  
 CZ5YT=    5-year  <CZ5YT=   0.7200  -0.0210   +161bp    -1bps
 RR                RR>                              s  
 CZ10YT            <CZ10YT   0.9440   0.0130   +157bp    +3bps
 =RR     10-year   =RR>                             s  
 PL2YT=    2-year  <PL2YT=   1.5180  -0.0150   +239bp    -2bps
 RR                RR>                              s  
 PL5YT=    5-year  <PL5YT=   1.6770  -0.0440   +256bp    -3bps
 RR                RR>                              s  
 PL10YT            <PL10YT   1.8210  -0.0460   +245bp    -3bps
 =RR     10-year   =RR>                             s  
                   FORWARD  RATE     AGREEME                  
                            3x6      6x9      9x12     3M
         Czech     <CZKFRA     1.99     1.76     1.57     2.14
         Rep       ><PRIBO                             
         Hungary   <HUFFRA     0.29     0.31     0.34     0.26
         Poland    <PLNFRA     1.70     1.63     1.57     1.72
         Note:     are for ask                                
         FRA       prices                              
 (Reporting by Krisztina Than in Budapest, Luiza Ilie in
Bucharest and Alan Charlish in Warsaw
Writing by Jason Hovet
Editing by Keith Weir)