CEE Weekly Bond Markets Outlook

27 August 2010

RAIFFEISEN BANK S.A.

 

Highlights

• Poland – The key factor for the bond market will be the release of second quarter GDP growth, which is scheduled for 30 August. We expect 3.2% yoy, with some room for an upside surprise. This could swing the balance among the MPC’s views back towards a more hawkish stance.
• Hungary – Monday’s rate-setting meeting resulted in no change, but as Governor Simor stated afterwards, the MPC was split three ways (there were votes for a hike and a cut,too). In addition, the NBH published the latest inflation report, in which economic forecasts were amended. There has been some speculation in recent days that Hungary will ask for a new credit line, after the Ministry of Economy stated that negotiations with the IMF/EU will continue.
• Czech Republic – Without paying much attention to the domestic news, Czech government bonds gained a bit further over the last week. Next week, the Czech Ministry of Finance will release its plan for government bond issues for Q4. The question is to what extent the ministry will rely upon the appetite of the domestic market and to what extent it will look towards the demand for CZK bonds among foreign investors.
• Romania – On 1 September, the statistical office is scheduled to release the details regarding the dynamics of the GDP components in Q2 2010. The figures for household expenditures and gross fixed capital formation should receive the most attention. Indicators referring to the period following the introduction of the austerity measures are starting to be released. The first of these will be the retail sales figure on 3 September.
• Croatia – The continued substantial reduction in budget revenues caused by the prolonged recession contributed to the first budget revision being used as an instrument to curb unplanned deficit growth. It had already become apparent that a budget revision would be necessary back in July, when the budget deficit reached HRK 7.2 bn,while the planned deficit for the whole year was HRK 8.5 bn.
• Turkey – Given the shakier global environment and the expected moderation of the domestic recovery, we expect a generally weaker TRY (against USD) in the coming months. In addition to global risk sentiment and the monetary policy stance of the central bank, Turkish markets will soon turn their attention towards a constitutionalreferendum that will take place on 12 September. A positive result for the ruling AK party in the referendumcould boost the value of Turkish assets, including the currency, in the short run.

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