CEE Bond Markets Outlook
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14 Ianuarie 2011 |
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RAIFFEISEN BANK S.A. |
Adresa
Piaţa Charles de Gaulle, Nr. 15
011857 Bucureşti, Sector 1
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+40-21-306.10.00
+40-21-306.15.54
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+40-21-230.07.00
Website
www.raiffeisen.ro
Highlights
Poland – We think that there is a fairly good chance for a correction on the bond market after the announcement of the decision next week. Moreover, investor sentiment on Poland is good and fundamentals remain strong, so we see hardly any reasons why the zloty should weaken considerably. As a result we stick to our "Buy" recommendation for Polish government bonds.
Hungary – The minutes of the Monetary Council meeting showed that two of the seven council members were absent from the latest rate-setting meeting. Another surprise was that one of the hawkish members already voted for unchanged rates, while the others supported the rate hike. As the two absent members would have voted for holding the rate in December already, we can assume that three members are going to support unchanged rates in January as well, while the other four members could still vote for a 25 bp rate hike considering the swings in the risk assessment in the previous weeks.
Czech Republic – In December, the higher prices of food and fuel drove up the average consumer price level by 0.5% mom. The year-on-year CPI accelerated to 2.3%, from 2.0% in November. However, the consumer price increases for 2011 will mainly be observed for those goods and services which are hardly or not at all influenced by Czech monetary policy. As an anti-inflationary factor, one might also mention the surprising increase in the unemployment rate in December to 9.6% from 8.6% in November.
Romania – Investor interest in RON government securities (short- and long-term) increased over the past weeks. As a result, the Finance Ministry paid lower yields to raise debt in the primary market but also borrowed larger amounts. Yields fell in the secondary market as well. We see more room for yields to decline in the coming period. Accordingly, we extend our recommendation on RON government securities from buy RON T-bills to buy all RON government securities (T-bills and T-bonds).
Croatia – After S&P's downgrade of Croatia's credit rating, selling pressure on government bonds intensified despite the low trading volumes. But during the last two weeks prices stabilised. On the other hand, Croatian Eurobonds reacted with some time lag as a result of weak liquidity during the holiday season. In the last two weeks, we have seen some spread widening, somewhat more pronounced on the longer end of the curve. This was just a matter of time since Croatia has the last notch of the investment grade with a negative outlook.
Russia – The Russian manufacturing PMI for December rose to 53.5, its highest level since March 2008, while December services PMI advanced to 56.4. The PMI was boosted by faster growth in new orders and strengthening economic momentum. Rising inflation, however, as evidenced by higher input prices cast a shadow on the overall recovery. December consumer prices surged by 1.1% mom, exceeding market consensus forecast of 0.8%. The central bank already hinted at the possibility of rate hikes in January.
Turkey – We still think that an interest rate cut of 25bp is possible, although the CBT may as well take a wait-and-see position with the currency now at a more comfortable level (and other emerging markets to hike interest rates). A rate cut would clearly support Turkish bond prices in over the short term, but even without such a move, we expect yields to decrease again due to low inflation levels in the first quarter (but will rise afterwards!).
