CEE Weekly - Bond Markets Outlook

10 Februarie 2012

RAIFFEISEN BANK S.A.

 

Highlights

Poland – As expected, the reference rate remained unchanged (4.5%). The MPC still sounded rather hawkish. Nevertheless, looking at strong data published after the January MPC meeting, the statement after the rate decision was surprisingly dovish. Next week, the CPI release will be the most important data release. If we get a reading below the avg. market estimate of 4.2% the Polish yield curve may flatten somewhat. From a short-term perspective, EUR/PLN may inch back to 4.20-4.25. However, we consider such levels as well supported. In the mid-term horizon we still assume a downward trend in the CPI (with strong downward movement in March) and a weakening economy will result in the first of two 25bp cuts as early as the 3rd quarter.

Hungary – The week ahead will be loaded with heavyweight macroeconomic data. Inflation (Tuesday) is expected to have jumped to 5% yoy in January due to indirect tax hikes and the weak exchange rate. Nevertheless, uncertainty is particularly high as depressed domestic demand may have offset some of the spillover effects, and thus the later data will show the full picture. On Wednesday, the first reading of GDP statistics will be published. We are somewhat more pessimistic than market consensus (+1% yoy), but a slowdown is almost guaranteed.

Czech Republic – Next week will be interesting due to several new data releases. In particular, the first GDP estimate for Q4 2011 and the CPI inflation for the first month of 2012 will attract attention. Although exports developed much better than we expected in Q4, other segments of the economy remain weak. We estimate GDP to have dropped by 0.1% qoq in Q4 and to only rise by 0.6 % yoy. This would confirm that a recession started in Q3. Considering the usual statistical deviation, we should speak about stagnation.

Romania – On Monday, Prime Minister Emil Boc resigned. President Traian Basescu appointed Justice Minister Catalin Predoiu as interim Prime Minister and nominated Mihai Razvan Ungureanu, Head of the Foreign Intelligence Service, to form the new government. On Thursday, the Parliament approved the new government proposed by Ungureanu. The Democratic Liberal Party (PD-L) sees the government reshuffle as a required step in order to regain the confidence of the public before this year’s local elections (probably in June) and parliamentary elections (probably in November).

1

2

3

4

5

6

7

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...