News
CZ: Negative – MinFin places CZK 6.3bn in CZGB 5.7/24: yield 3.193%, bid/cover 1.1 (p2)
HU: Positive – July IP accelerates to 2.7% yoy (p2)
PL: Neutral – MPC keeps policy rate unchanged at 4.50% (p2)
Today’s Events
BG: July IP, July Retail trade / CZ: 2Q GDP (final), Aug Unemployment / CR: Aug PPI / HU: 2Q GDP, HUF 20bn 2014, HUF 15bn 2017 and HUF 10bn 2028 auctions / RO: July IP / RU: 2Q GDP (prelim) / SK: July IP, July Trade balance / SRB: Policy rate decision, 3M t-bill auction
EEMEA Markets
* Global backdrop: the risk on mood ran out of steam toward the end of the day in Asia and hence the open looks flat in CEEMEA markets. The main focus will be on the ECB meeting today. As markets are looking for a cut we see some scope for disappointment which would have negative implications on CEEMEA local currency bond markets where the rally in POLGB and CZGB markets was running out of steam yesterday. On the other hand market chatter about a coordinated G7 intervention as early as this weekend could provide some support for risky assets.
* Poland: the NBP MPC left rates unchanged at 4.50% and did not change the statement meaningfully since the last meeting. This clearly had a mildly hawkish impact on the bond market with PLN IRS gapping around 10bp during the day. This in turn provides a minor support for the PLN particularly if the ECB sounds dovish at today’s meeting.
* Czech Republic: the CZGB rally looks like running out of steam with the 05/24 CZGB paper at ASW+85bp receiving only 1.1 bid/cover ratio at yesterdays auction. We think this was primarily due to the back up on bund yields. We still maintain our constructive multi week view but would look to enter only at better levels. Any hawkish surprise at the ECB meeting would obviously have an adverse impact on the CZGB market.
* Serbia: the NBS will hold a rate setting meeting today and we would not rule out a 25bp rate cut following the EUR1bn PCL agreement with the IMF and supportive CPI dynamics. We believe this will likely attract non-resident interest into the local t-bill market. With EUR/RSD still trading above the 100.0 level we think the door is open for a move to around 98.00.
* Hungary: the AKK will hold bond auctions today. HUF20bn 14/D, HUF15bn 17/A and HUF10bn 28/A paper will be offered. We note that cash bonds have lagged the sharp rally in the IRS market in the last 2 days and hence ASW spreads have widened by about 10bp at the long end this wwek. On this basis HGB investments look attractive from relative perspective. In standard deviation terms (ASW vs. the 6M range) we see particularly the 17/A paper (+2.7stdev deviation from average) relatively cheap at ASW+81bp. On the other hand the 14/D paper at about ASW+38bp looks slightly expensive.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/09/EEMEA-Daily_8Sept11.pdf
Gyula Toth
UniCredit Research