CEE - Bond Markets Outlook

19 Decembrie 2011

RAIFFEISEN BANK S.A.

 

Highlights

Poland – November consumer prices came in much higher than expected (4.8% yoy versus 4.5% expected). Hence, some forecasters and MPC members are still voicing hawkish comments, while other forecasters (including us) see a substantial slowdown ahead. Such an environment should translate into rate cuts in 2012. However, in order to make rate cuts feasible exchange rate stability is needed. The latter can be only achieved in a less volatile international market environment. For the time being we expect PLN volatility to remain high and there is still some time left to enter the LCY bond market in order to profit from the upcoming rate cut cycle.

Hungary – The Monetary Policy Council meets on Tuesday: we forecast a 50bp hike, which matches market consensus. But we also note that the risks to our forecast are skewed to the downside. Thus, we think a smaller raise (or even none) is morepossible than a bigger hike. Such a surprise would be taken negatively, and would weaken HUF and HGBs, as markets are currently clearly pricing in 50 basis points. Other than that, we are set for a calm trading week with low volumes as the end ofthe year approaches.

Czech Republic – The main market mover for the coming weeks will be risk aversion associated with the debt crisis in the Eurozone. On the domestic front, next week’s CNB meeting will also attract some attention. Any change in interest rates would be very surprising now. On the other hand, the CNB wording after the meeting could be important. Recently, some members have expressed their concerns about the weakness of the Czech koruna.

Romania – Monthly inflation came in at 0.42% mom in November, bringing the annual change in consumer prices to a new low of 3.42% yoy. The level and the dynamics of the inflation rate leave room for the central bank to cut the monetarypolicy rate at the next monetary policy meetings (providing no major constraints arise from developments on the external markets).

1

2

3

4

5

6

7

8

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...