CEE Bond Markets Outlook
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31 Iulie 2011 |
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RAIFFEISEN BANK S.A. |
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Piaţa Charles de Gaulle, Nr. 15
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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 – Polish markets continued to trade sideways. Recent economic data are confirming a “soft patch” in the Polish economy. Surveyed inflation expectations by the NBP are scheduled to be released today in the afternoon. The data should show a stabilisation or decrease and should reaffirm the NBP in its current wait-and-see stance. Only changing interest rate expectations (currently the market is pricing in another 25bp as a maximum) may lead to repricing on the LCY bond market.
Hungary – HUF proved to be relatively resistant to the mounting risk aversion, while non-resident holdings of HGBs inched to new historical highs over HUF 3,740 bn. This means that the effect of the European debt crisis is still limited as the government is sticking to the targeted debt decrease and deficit numbers, which is a positive counterpoint to the European developments. The government’s commitment to the strict targets was proved recently, as the Economy Ministry commented that it is considering selling the previously bought MOL stake to boost its revenues to meet the goals.
Czech Republic – The Czech National Bank will decide on interest rates next week. In our base scenario, we expect a rate hike in Q3 i.e. in August or September. On 4 August, the new CNB forecast will be released. This leads to a higher probability for a rate hike in August already. On the other hand, the current global risk aversion affecting the Euribor speaks in favour of a rate hike postponement. Also, the CNB might be curious about the further development of the CPI and GDP, both of which will be released in August.
Romania – On Tuesday, the Finance Ministry announced an auction for a local 4-year EUR bond for the next day. The Finance Ministry borrowed EUR 463 mn at 4.85%, while the initial target was of EUR 600 mn and investors’ bids amounted to EUR 966 mn. Around EUR 2.4 bn in a club loan and a 1-year EUR T-bill reached the maturity this week. The Finance Ministry already had the resources to repay the debt (from a local EUR bond issued in May and a Eurobond issued in June) and its liquidity position is comfortable.
Russia – Russia’s finance ministry reported a federal budget surplus of 2.7% of GDP in the first seven months of 2011. The surplus was merely the result of the underestimated oil price in the original budget plan helping the government to easily outperform its fiscal targets. However we see a few challenges lying ahead of the government, which might undercut budget performance in coming months and in the next three years. Meanwhile the rouble remains exceptionally strong after rallying beyond 33.00 vs. the dual currency basket. However a risk of profit-taking on the rouble market may push the rouble back to 33.10 vs. the basket in coming days.
Croatia – The Government adopted the new fiscal guidelines 2012-2014 with the main aims in the next three years as follows: decline in the ratio of budgetary expenditures to GDP, budget deficit reduction and reduction of public debt/GDP ratio. The planned reduction of general government deficit to 2.6% in 2013 from 4.9% in 2011 seems a bit optimistic compared to our forecast and market consensus.
Turkey – In Wednesday’s inflation report, the Turkish Central Bank (CBT) said it would leave the policy rate unchanged until the end of the year in its main scenario. Markets took the report positively, also influenced by recent CBT actions to halt FX purchases and lower minimum reserve requirements on FX deposits. We remain cautious with regard to the lira, which could see phases of volatile swings in the near future. Given the dovish interest rate policy, yields may continue to hover around the current level in the coming weeks.
