BUDAPEST/PRAGUE: Central European currencies and equities mostly firmed on Wednesday after remarks by Polish Deputy Prime Minister Mateusz Morawiecki eased concerns that a planned conversion of Swiss franc loans would hit earnings in the bank sector.
Polish stocks jumped after Morawiecki said the conversion, which has been regarded in markets as a key risk to the zloty and stock prices, should be voluntary.
"The news that... the whole Swiss franc bill is likely to be modified really improved the sentiment," one Warsaw-based dealer said.
Poland's bluechip equities index rose 3.2 percent by 1526 GMT, with the stocks of PKO BP bank gaining 2.5 percent and BZ WBK bank stocks rising 6 percent.
Shares of oil group PKN Orlen rose 6.4 percent and copper produce KGHM gained 6.6 percent as a rebound in crude prices lifted commodities-linked assets around the world.
The zloty and the forint, which have often tracked crude prices in recent months, together with other emerging market currencies firmed 0.3 percent against the euro.
Czech government bonds gave up early gains after central bank Vice-Governor Mojmir Hampl said that he would not vote for negative interest rates at the moment.
Czech markets in the past weeks have priced in the risk of the bank taking interest rates into negative territory.
The 4-year paper touched a 2-and-1/2-month low in early trade at a negative yield of -0.106 percent and the 5-year yield a 2-month low of -0.055 percent.
The 5-year Czech yield, bid at -0.047 percent late in the session, was about 25 basis points higher than the corresponding Bund, but well below regional peers, with Polish 5-year bonds yielding 2.26 percent, Romania's corresponding bonds about 2.16 percent and Hungarian papers 2.43 percent.
Dealers still see the potential for a fall in Czech yields as primary sales are declining after an early-year dumping which pushed up yields. The Czech central bank said earlier this month it had seriously discussed the possibility of negative rates.
"Since then, yields are dropping dramatically," a dealer in Prague said, adding that they were back to levels seen before the January supply rise.
The central bank has had to intervene occasionally since July to keep the Czech crown weaker than levels near 27 against the euro. The market is increasingly pricing in a 20 or 25 basis point cut in the bank's interest rates, which are already seen near zero in the middle of the year.
Monetary policy trends in Central Europe will strongly depend on the pace of easing by the European Central Bank, some market participants said.
"In case the ECB delivers much more than just a minor cut of the deposit rate to -0.4 percent in March, pressure on the CZK and hence the Czech National Bank may rise significantly," Raiffeisen said.
Comments
Comments are closed for this article.