Bonds News

CORRECTED-CEE MARKETS-FX gets boost from euro zone PMI, leu recovers from lows

 (Corrects 3rd paragraph to say leu 'traded near an all-time
low' not 'touched an all-time low')
    PRAGUE, Nov 22 (Reuters) - Central Europe's currencies
mostly edged higher on Friday, boosted by euro zone
manufacturing data and renewed efforts in the U.S.-China trade
dispute, although Hungary's forint underperformed and remained
near record lows.
    In Romania, the leu firmed going into the second round of a
presidential election in which incumbent Klaus Iohannis is
expected to beat Social Democrat Party leader Viorica Dancila,
whose government was toppled in October. 
    The gains were a rare reprieve for the currency which has
gradually dropped during the second half of the year to trade
near an all-time low this week as investors remain wary over
what many fear is a swelling budget deficit.
    Finance Minister Florin Citu said earlier this month the
deficit could overshoot 4% of economic output this year without
additional measures, leaving the new government little time to
work up a remedy.
    Commerzbank said the vote, even if Dancila lost, showed the
Social Democrats could still make life difficult for the new
minority government leading the country to elections next year.
    "This is not a particularly good prospect for the leu, as it
is under depreciation pressure anyway due to the current account
and budget deficit," Commerzbank analyst Alexandra Bechtel said.
    Ionut Dumitru, chief economist at Raiffeisen Bank Romania,
also said markets were waiting to see what budget measures the
government would take.
    "At a deficit of over 4% of GDP this year markets could
become fairly anxious," he said. "A signal from the government
that it is aware of the situation and is taking measures to
correct it is needed."
    The leu had gained 0.1% to 4.772 to the euro by
1037 GMT, off a record low of 4.7835. 
    The currency is the second-worst performer in the region in
2019, losing 2.5% since the start of the year. 
    The forint has lost almost 4% and is also drifting just off 
record lows hit in late September as loose monetary policy at
home and weak global sentiment caused by trade wars and
Britain's uncertain EU exit weigh on it.
    On Friday, it ticked up less than 0.1% to 334.20 per euro,
failing to benefit from better sentiment after China renewed
efforts to work out a trade pact with the United States.

    Better-than-expected manufacturing PMI data in the euro zone
- the key trade partner for central Europe's export-dominant
economies - also lifted the mood. 
    Stock markets rose, led by Warsaw and Prague's
 0.6% advance.
    The Polish zloty and Czech crown also
rose 0.1%.
    "The market is feeling the situation in European
manufacturing is bottoming out," ING's chief economist in
Prague, Jakub Seidler, said.
    "Everything will be dependent on foreign developments. If
there is a trade deal, the situation would improve. But it is
too premature, we are not yet there."
                                CEE MARKETS        SNAPSHOT    AT                        
                                                                 1137 CET                
                                                   Latest      Previous        Daily     Change
                                                   bid         close           change    in 2019
 EURCZK=    Czech crown                            25.5150     25.5360         +0.08%    +0.75%
 EURHUF=    Hungary forint                         334.2000    334.4150        +0.06%    -3.92%
 EURPLN=    Polish zloty                           4.2951      4.3000          +0.11%    -0.13%
 EURRON=    Romanian leu                           4.7720      4.7784          +0.13%    -2.47%
 EURHRK=    Croatian kuna                          7.4380      7.4373          -0.01%    -0.38%
 EURRSD=    Serbian dinar                          117.5200    117.5800        +0.05%    +0.66%
            Note: daily change  calculated from                                1800 CET Latest      Previous        Daily     Change
                                                               close           change    in 2019
 .PX        Prague                                 1080.11     1073.6900       +0.60%    +9.48%
 .BUX       Budapest                               43713.89    43654.37        +0.14%    +11.69%
 .WIG20     Warsaw                                 2192.90     2179.53         +0.61%    -3.68%
 .BETI      Bucharest                              9719.62     9713.16         +0.07%    +31.64%
 .SBITOP    Ljubljana                              898.97      893.52          +0.61%    +11.78%
 .CRBEX     Zagreb                                 1999.67     2000.63         -0.05%    +14.34%
 .BELEX15   Belgrade                               762.78      763.55          -0.10%    +0.14%
 .SOFIX     Sofia                                  550.43      550.00          +0.08%    -7.41%
                                                   Yield       Yield           Spread    Daily
                                                   (bid)       change          vs Bund   change in
            Czech Republic                                                               spread
 CZ2YT=RR   2-year                                 1.4060      0.0230          +203bps   +3bps
 CZ5YT=RR   5-year                                 1.2650      0.0570          +186bps   +8bps
 CZ10YT=RR  10-year                                1.4820      -0.0190         +183bps   +1bps
 PL2YT=RR   2-year                                 1.4070      0.0120          +203bps   +2bps
 PL5YT=RR   5-year                                 1.7840      -0.0310         +238bps   -1bps
 PL10YT=RR  10-year                                2.0670      -0.0080         +242bps   +2bps
                                FORWARD            RATE        AGREEMENT                 
                                                   3x6         6x9             9x12      3M interbank
            Czech Rep                              2.25        2.25            2.18      2.18
            Hungary                                0.22        0.26            0.30      0.18
            Poland                                 1.74        1.70            1.67      1.71
            Note: FRA quotes    are for ask prices                                       
            ************************************************************** (Reporting by Jason Hovet in Prague and Luiza Ilie in
Bucharest; Editing by Kirsten Donovan)