News
CZ: Positive – Finance Ministry raised its outlook for 2011 GDP growth to 2.5% (p2)
PL: Positive – Govt successfully sells new 10Y benchmark POLGB (p2)
TK: Dovish – CBT keeps policy, RRR unchanged, statement dovish (p2)
Today’s Events
CR: June Unemployment / RU: Money supply as of July, 18 / UA: 2Q C/A
EEMEA Markets
Turkey: the TRY basket was trading only a few ticks away from all time high at 2.06 whilst short end rates moved about 10bp south after the CBT kept rates unchanged and issued a very dovish comment. Following this statement we believe that the risk is increasing that the CBT will not hike rates at all this year. We believe the bullish rate sentiment could primarily concentre on the short end of the curve. We agree with the TRY reaction and would expect it the test of all time high on the basket. From here we will also watch retail USD deposits which might slow down the depreciation pressure somewhat. We would nevertheless stay defensive in TRY. Comments from Fitch that the wide current account deficit might prevent the upgrade to investment grade also contributed to the bearish sentiment in the FX market. We believe this will also see Turkish credit underperforming in the coming months, despite already significant U/W positions.
Poland: the MinFin auctioned a new 10Y benchmark bond DS1021 yesterday and the total offer was placed on the market (preliminary offer at 1.0-3.0 bn PLN). The demand was strong at PLN 5.6 bn vs. PLN 3.0 bn sold. We believe the success is primarily coming from the fact that issuance is rather limited whilst some local players are still relatively short duration in POLGB. We believe the relatively dovish NBP (following the CPI release), recent comments that the 2011 deficit will be PLN10bn better than planned and limited supply (particularly at the long end) will continue to support POLGBs and we recommend extending duration exposure back to neutral. As the belly of the curve is relatively rich to the wings (see chart) we recommend to keep this duration through the wings (2y and 10y papers).
Romania: The MinFin sold RON 388mn in 10Y ROMGBs (planned volume RON 350mn), average yield 7.46%, marginally down from 7.47% on 23 June. We believe the Romanian long has yet to catch up with the short end and also need to price a better credit risk following the upgrade. Today is the deadline for the Petrom deal and recent comments suggest a successful placement which should be supportive of the RON. We keep our constructive stance toward Romanian assets (FX, rates and credit).
Serbia: EUR/RSD extended the move north and was trading above 104.50 yesterday as the cross so far completely failed to benefit from the improved global risk appetite. We had a meeting yesterday with NBS Deputy Governor Bojan Markovic and our impression was that the bank is not overly worried about the recent RSD weakness (also suggesting lest active intervention policy) whilst the easing cycle can continue from the current level (for details see inside this daily).
http://www.easyforexnews.net/wp-content/uploads/2011/07/eed_fi_220711_0000.pdf
Dmitry Veselov / Gyula Toth
UniCredit Research