Wires

CEE MARKETS-Stocks, currencies extend losses after ECB, Budapest index tumbles over 10%

Larry King, Susan Fenton and Alex Richardson)

tumbles over 10%@ (Updates markets after ECB, adds fresh comment, Romania bond tender) BUDAPEST, March 12 (Reuters) - Central European stock markets extended losses on Thursday led by a 10.5% fall in Budapest, and currencies also fell as the ECB's stimulus measures failed to put a floor under markets as investors fret over the impacts of the spreading coronavirus. Markets had opened at multi-year lows on Thursday after U.S. President Donald Trump imposed strict limits on travel from Europe, and players had been looking to the meeting of the European Central Bank (ECB) for rays of hope. The ECB approved fresh stimulus measures to help the ailing euro zone economy cope with the shock of the coronavirus pandemic, but unexpectedly kept interest rates on hold.

"So far the ECB decision had no impact ... the market is quite in disarray," a dealer in Budapest said. "It is hard to say which way we will go in the next days. If the situation worsens and the number of fresh infections rises that could also impact the forint." The region's currencies extended losses, with the Czech crown losing the most, 1.7%, as markets weighed whether the central bank would reverse its recent interest rate tightening as the economy comes under strain. The forint was also down 0.7%, but still clear of its all-time low past 340 per euro hit in February. "EUR/CZK has been or may be still is a very crowded trade, so it is now under biggest pressure from CEE3, and of course (there is) a lot of space for cutting rates as well, even if this is probably not an imminent threat," a dealer said. Hungary scrapped a 10-year and 20-year bond auction on Thursday and sold less than planned of five-year bonds as bids dwindled amid high volatility and uncertainty in markets. "The forint has started to weaken and yields climbed upwards today," a Budapest dealer said, adding that overnight interbank rates also ticked upwards. "If we look at this bond auction positively then we can say the debt agency can afford not accepting bids, and if we look at this negatively then this auction has failed," he said. Hungary sold 17 billion forints ($56.5 million) worth of five-year bonds, below its 20 billion offer and significantly less than the original 60 billion forints the tenders intended to raise. Romania rejected all bids at a treasury bond tender. Warsaw's blue-chip index slumped 10% to its lowest since mid-2009. The Prague index fell more than 5% to its lowest since July 2016. Shares of Central Europe's largest independent bank, OTP Bank, plunged more than 16% below the 10,000 forints threshold before regaining some ground, and then resumed losses to trade at 10,050 forints, down 15% at 1354 GMT. Shares of Polish bank Pekao also fell 15%. "The volatility of zloty and forint exchange rates shot up and stock markets in Poland and Hungary were battered amid fresh fears of virus spread, which led to both countries declaring states of emergency and suspending key economic activities," Commerzbank said in a note. The Czech Republic was also introducing controls on its borders with Germany and Austria and banning crossings away from official frontier border posts to help fight the spread of the coronavirus, Interior Minister Jan Hamacek said on Wednesday.

Hungary on Wednesday banned inbound travel from Italy, South Korea, Iran and China for non-Hungarians in response to the coronavirus outbreak. Analysts were increasingly drawing parallels with the 2008 global financial crisis and assessing the expected economic fallout globally. "In CEE FX, all currencies depreciated against the EUR," Morgan Stanley said. "Hungary was the only country in CEE where the market did not imply easing but that is no longer the case after Wednesday. Moreover, the government declared a state of emergency due to Covid-19, shutting universities and restricting travel from certain countries." Romanian lawmakers meet late on Thursday to decide whether to give their vote of confidence to designated Prime Minister Florin Citu's government. Citu's minority Liberal Party has been trying to trigger early elections. His cabinet was initially expected to lose the vote, but chances for a positive vote have increased as the spread of coronavirus cases has heightened the need for political stability rather than upheaval.

CEE SNAPSHOT ATMARKETS 1439 CET

CURRENCIE S

Latest Previous Daily Changebid close change in 2020Czech 26.1990 25.7600 -1.68% -2.93%

crown

Hungary 338.6000 336.2500 -0.69% -2.20%

forint

Polish 4.3646 4.3162 -1.11% -2.48%

zloty

Romanian 4.8220 4.8189 -0.06% -0.70%

leu

Croatian 7.6090 7.5755 -0.44% -2.15%

kuna

Serbian 117.7000 117.6300 -0.06% -0.11%

dinar

Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2020Prague 825.06 885.1000 -6.78% -26.05%Budapest 32894.81 36536.24 -9.97% -28.62%Warsaw 1356.66 1505.64 -9.89% -36.90%Bucharest 7724.35 8381.47 -7.84% -22.58%Ljubljana 757.77 827.84 -8.46% -18.16%Zagreb 1429.47 1591.42 -10.18% -29.14%Belgrade <.BELEX15 726.17 752.28 -3.47% -9.42%>Sofia 458.10 495.12 -7.48% -19.37%Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=RR 1.6390 -0.2040 +255bps -26bps>5-year <CZ5YT=RR 1.3760 0.2380 +223bps +18bps>10-year <CZ10YT=R 1.1040 -0.0280 +183bps -6bps

R> Poland

2-year <PL2YT=RR 1.3480 0.1150 +225bps +6bps>5-year <PL5YT=RR 1.7570 0.2740 +261bps +21bps>10-year <PL10YT=R 1.8330 0.1200 +255bps +9bps

R> FORWARD

3x6 6x9 9x12 3M

interban k

Czech Rep < 1.82 1.38 1.06 2.33

PRIBOR=>

Hungary < 0.58 0.59 0.66 0.66

BUBOR=>

Poland < 1.30 1.05 1.01 1.69

WIBOR=> Note: FRA are for ask prices quotes

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($1 = 301.0500 forints)

(Additional reporting by Jason Hovet and Alan Charlish; Editing