Bond Markets Outlook

24 August 2009

RAIFFEISEN BANK S.A.

Recommendations (1-month horizon)

Neutral PLN bonds; Neutral HUF bonds; Neutral CZK bonds

 

Highlights

� Poland - In our view, the chances of a rate cut being implemented at the August MPC meeting are very low. Although we do not rule out further rate cuts this year, we feel that the recent inflation figures clearly decreased the likelihood of such a move. We remain neutral on Polish bonds in the short run.

� Hungary - On Monday (24 August) the Monetary Council will meet to discuss interest rates. In our opinion, another 50 bp interest rate cut seems likely, as both inflation and weak GDP data point towards another cut. With inflation likely to rise in the coming months until the end of the year (due to the VAT hike) and with the uncertain global economic outlook, the chances for additional interest rate cuts in the fourth quarter seem limited.

� Czech Republic - Although we see some more room for a decline of Czech yields at the longer end of the curve in a medium term perspective, the rising risk for a short-term correction was the deciding factor to take profit and change our buy recommendation to a neutral position for the time being.

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