News
CZ: Positive – CPI dips 0.2% mom in September / Positive – September unemployment falls 0.2%-points to 8.0% (p2)
KZ: Positive – PM posted on tweeter that real GDP growth was 7.0% yoy in Jan-September (p2)
PL: Positive – Election results show strong support for the Civic Platform (p2)
RO: Negative – MinFin issues 11M T-Bills worth RON 116.8mn / Mixed – August exports up 24.1% yoy, but outpaced by +26% yoy rise in imports (p3)
Today’s Events
HU: September CPI, HUF 30bn 3m t-bill auction / RO: September CPI / SRB: RSD 7.6bn 2014 GB auction / RU: September Budget lvl YTD / SRB: Nov PPI / SK: August Industrial Sales, Wages / SL: EUR 30mn 91d t-bill auction / TK: August C/A, 2013 and 2014 GB auctions
EEMEA Markets
Global backdrop: the weekend pledge by Merkel and Sarkozy about EMU bank recapitalization led to sharp rally of risky assets with the DAX up almost 3%. The positive sentiment has been carried over into the Asian session as equities closed 2% higher. Meanwhile EUR/USD jumped more than 2% as the short squeeze led to significant profit taking. The focus is now shifting on the Slovakian EFSF approval but we think a positive outcome is already in the price. Notwithstanding this we think several fast money accounts are still holding onto bearish bets which will likely lead to further short squeeze in the near term. In CEEMEA we are looking for another strong day with PLN and HUF leading the pack.
The Polish election outcome was taken positively by markets with PLN rallying almost 2% against the EUR and regional FX markets also rallied sharply. POLGBs also performed relatively well but the sell-off in Bunds and Treasuries capped the rally. From here we see particularly the mid part benefiting (04/16 and 10/15) from the squeeze. We also keep our regional RV trade a long PLN/HUF with a target at 70.0.
Romania: the MinFin issued only partial amount at the 11month t-bill tender with yields matching the maximum level from the last auction. We expect further shift toward shorter maturities. We also not exclude a potential Eurobond or locally issued EUR denominated papers.
Turkey: TURKGB auctions (2013 and 2014) today might see ok demand with yesterday’s IndOut release providing further credibility for the CBT. We would remain positive on TRY but keep a very close eye on the EUR/USD developments.
Hungary will auction 3m t-bills today (only HUF30bn on offer) and will publish the Sept CPI. Meanwhile HGBs rallied sharply (yields down 20-25bp). Yesterday we put out a note (EEMEA Credit Explorer) suggesting that the Rephun USD 21 papers are not only cheap vs. the local currency bonds but also vs. the EUR denominated papers. We hence see logic in switching into the cheapest Hungarian asset class.
Serbia will auction RSD7.6bn 2014 paper today. Given limited supply we expect an ok auction with yield likely coming at the last auction level. Meanwhile several investors see the RSD relatively expensive as it has lagged the recent CEEMEA sell-off.
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Gyula Toth
UniCredit Research