CEE Weekly Bond Market Outlook

28 Septembrie 2010

RAIFFEISEN BANK S.A.

 

Highlights

Poland – In the middle of the successful bond placements, Finance Minister Rostowski, announced that the general budget deficit for 2010 will reach PLN 100 bn. He declined to quote a figure in terms of GDP, but according to our estimates this figure should settle in around 7.2%-7.5%, after having reached 7.1% in 2009.

Hungary – The NBH is expected to hold rates at 5.25% on Monday, but the real question is how the fiscal developments will affect the MPC. Last month, two members (incl. Governor Simor) voted for a 25 bp hike, but as public financing risk is melting due to the deficit cuts, the MPC could move to a less hawkish stance. The market still expects rate hikes to come judging from the prices, although expectations for the first increase were pushed further in to Q4 2010.

Czech Republic – The end of September is looking quite poor as regards new data releases. Furthermore, next week will be eroded by a holiday on Tuesday. We have changed our midterm recommendation to SELL Czech government bonds with maturities over 5 years, since the government bond yields have dropped too low given the outlook for bond supply.

Romania – We expect the NBR to remain on hold at its monetary policy meeting on 29 September, keeping the monetary policy rate unchanged at 6.25%. But we cannot rule out a cut in minimum reserve requirement ratios.

Croatia – The negative pace of growth in industrial production has continued to ease. In August, industrial production fell 0.7% yoy. Production of durable goods fell the most (-12.4%) as a consequence of the fall in households’ disposable income, which undercut demand and therefore the production of durable goods. Since domestic demand is still too low to reverse the negative trend, industrial production only continues to decline more slowly as a result of the rise in foreign demand.

Russia – The rouble market might continue its downward drift, although we find the current levels already too low and would like to suggest accumulating a rouble position, going from 35.70 back to 35.00 in two months’ time. According to the central bank of Russia trade flows remain positive in support of rouble appreciation, while the present market weakness is generated by more technical factors such as short-term capital flows which increase rouble volatility.

 

Local currency bonds

Market overview

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