News
CZ: Negative – July C/A posts CZK 12.8bn deficit (p2)
HU: Negative – Government supports FX mortgage plan but does not force banks to provide HUF financing (p2)
PL: Neutral – July C/A posts EUR 1.6bn deficit (p2) (p2)
RO: Mixed – August CPI fell to 4.3%yoy, about 30bp below market consensus, Jan-July C/A improves 24%yoy but FDI coverage deteriorates / MinFin sells RON1.2bn 1-tbill, bid/cover 1.9, yield 3bp higher (p3)
Today’s Events
HU: August CPI / HU: 3M t-bill auction (HUF60bn on offer) / PL: August CPI / SA: 2021 & 2031 SAGB auction (ZAR2.2bn on offer) / SA: Q2 current account balance
EEMEA Markets
* Global backdrop: moderate improvement was seen in the US and in the Asian equity markets O/N whilst EUR/USD consolidated around the 1.36 level. Meanwhile EUR/USD basis swaps (3M around negative 110bp) and European Senior Financial credit spreads (5y jumping above 300bp for the first time) continue to indicate a serious level of stress in the Eurozone banking sector. Till these do not consolidate we expect persistent volatility in CEEMEA markets as well with market focusing on how this will affect lending dynamics in the region. Today the main focus will be on the Italian bond auctions with O/N announcement about a likely Chinese investment helping the sentiment. We are looking for a mixed open in CEEMEA markets with USD referenced markets likely continue to outperform EUR referenced markets.
* Hungary: the market consolidated somewhat following the announcement by PM Orban about the FX mortgage plan (5y CDS is now trading at 460bp about 175bp wide to SOVX CEEMEA). Our reading of the announcement that was minimally positive to the extent that the government is not forcing the banks to provide HUF. On the other hand the asymmetrical distribution of the FX mortgage portfolio in the banking sector might force a dangerous competition. From here we are looking for series of the negative comments from various international participants with the main question weather any rating agency downgrades banks due to likely capital losses. We maintain our view that currently only FX hedged t/bills are the only attractive instruments at current levels. Today the AKK will auction HUF60bn 3m papers. The CSO will also publish the Aug CPI numbers at 8am ldn time.
* Turkey & Poland: our trade idea from last week to go long TRY/PLN has reached our initial target at 1.78 (providing 3.5% return since inception last Thu). We believe the broad theme of USD referenced outperformance and the difference in the two countries banking sector liquidity management provide further reason to stay in this trade. We hence increase our target to 1.85 and also increase our stop loss to 1.75 to protect our profit. Today the Polish Statistic Office will publish the Aug CPI at 1pm ldn time. The market consensus is looking for unchanged inflation rate at 4.1%yoy.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/09/EEMEA-Daily_13Sept11.pdf
Gyula Toth
UniCredit Research