CEE - Bond Markets Outlook

4 Noiembrie 2011

RAIFFEISEN BANK S.A.

 

Highlights

• Poland – Domestic data show a relative strength of the Polish economy. Nevertheless, we remain cautious with regards to the resilience of the domestic economy. We are also sticking to our interest rate call (50bp rate cuts in H1 2012) and do not see pressure from the ECB on the NBP to push rate cuts forward to 2011. Therefore, we think that it might still be too early to bet on decreasing long-term yields in Poland. Better entry opportunities could be in the pipeline in the weeks ahead depending on the further development of the Eurozone troubles and the willingness to take directional positions on the Polish bond market.

• Hungary – We observed some improvement in the government’s one-sided and almost dictatorial attitude towards the financial sector, as economic minister Matolcsy negotiated with the Banking Association about the problem of FX mortgage loans. This is not a game-changer yet, but is a positive turnaround, as there are no more FX assistance measures on the agenda for the time being. The Banking Association will introduce a plan to solve the CHF problem in two weeks. These developments may be interpreted as a positive sign for the rating agencies, although rating downgrade fears are still present.

• Czech Republic – Next week will be full of domestic data releases that should confirm an economic deceleration and a stagnation of unemployment. The CNB meeting has not changed our expectation of no change in the key interest rate in 2012. As the CNB mentioned, the risks to the forecast are skewed towards an “alternative” scenario, in which the Eurozone GDP stagnates in 2012 and EUR/CZK is just 24.20 on average. This is actually closer to our forecast than the CNB’s baseline scenario.

• Romania – We do not believe that the decision to cut the monetary policy rate will have any significant impact on the yields for RON government securities or on the exchange rate in the short term. Developments on the external markets will remain the main driving factor behind their dynamics.

1

2

3

4

5

6

7

8

9

The tricky lag LUCIAN CROITORU Adviser to the Governor - BANCA NAŢIONALĂ A ROMÂNIEI Lucian Croitoru, Adviser on monetary policy issues to the National Bank of Romania Governor, talks about the NBR’s next moves and explains why the decrease ofthe policy rate hasn’t been reflected into lower interest rates on bank loans. mai mult... The turnaround CRISTIAN SPORIS Secretar de Stat - MINISTERUL ECONOMIEI ŞI FINANŢELOR Cristian Sporis, Secretary of State at the Ministry of Public Finance, in charge with the national treasury and public debt, explains how the state managed to borrow money at the lowest costs in the last seven years and how it turned from a clear market taker into a player with a strong position on the market. mai mult...