News
BG: Neutral – CPI slows to 3.3% yoy, flat mom (p2)
CZ: Neutral – FinMin M. Kalousek says this year’s public sector deficit will end up below 4% of GDP (p2)
PL: Neutral – At the switch tender MinFin bought back PLN 0.8bn DZ1111, PLN 1.2bn OK0112 and PLN 0.8bn PS0412 against PLN 3.2bn OK01114 (p2)
Today’s Events
CZ: August C/A, CZK 8bn 364d t-bill auction / HU: August Retail trade, HUF 40bn 12M t-bill auction / PL: September CPI, August C/A / RO: August C/A / RU: September Budget lvl ytd, FX reserves as of Oct., 7th / SK: September CPI
EEMEA Markets
Global backdrop: the positive market sentiment was carried over into the Asian session with equities up by 1.0/1.5% whilst USD/KRW is 1% lower. EUR/USD is just hovering around the 1.38 level. The FOMC Minutes unveiled that a balance sheet expansion was considered as an option in case the economic outlook worsens. CDX HY tightened more than 30bp and is opening rather flat this morning. In the CEEMEA credit universe the SovxCE spread is 10bp tighter this morning after a 20bp tightening yesterday. In CEEMEA FX space HUF and ZAR rallied strongly whilst PLN and CZK underperformed. As the data calendar is light today we expect the extension of positive momentum in CEEMEA. We remain marginally positive on risky assets in CEEMEA but would no be carried away by the bullish momentum and hence would not be overly aggressive in terms of targets. We still see residual value in Rephun USD 21 at around 435bp z-spread (we went long on Monday) and we still see some value in buying mid part POLGB curve (04/15, 10/15 and 04/16).
Poland: September CPI (cons: 4.1%yoy) and August current account balance (cons: EUR1.3bn deficit) will be published today. Given inflation is not in the key focus at the moment and the regional inflations surprised on the downside earlier this week we see the data on balance supporting a dovish outlook for POLGBs. We still see value in buying mid part POLGB curve which has been the main underperformer in the sell-off period (we see scope for another 15/20bp yield tightening).
Hungary: although local HGBs closed a strong session yesterday we would use the bullish momentum in the local market to build bearish positions again. We still see logic in adding a short HGB 22/A ASW positions at around+70bp with a potential target of +150bp as due to the closing of the EUR/HUF basis swaps (on the back of the FX mortgage repayment) the local bonds will turn very expensive vs. hard currency bonds (hence we are positive on Rephun USD 21). We would also continue to pay 1-3years EUR/HUF basis swaps. Today the AKK will auction HUF40bn 1y t-bills. Given the HGB maturity yesterday we expect solid demand.
Russia: the CBR increased the 1day repo auction amount to RUB400bn from RUB250bn in an effort to cool money market liquidity squeeze. We are considering to take profit on our remaining 2y RUB CCS payer.
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Gyula Toth
UniCredit Research