News
CZ: Neutral – CNB keeps monetary policy unchanged, forecasts lower GDP growth (p2)
PL: Positive – MinFin says it financed 101% of 2011 financing needs in Jan-Oct (p2)
RO: Positive – MinFin sells RON 0.5bn 2Y GBs: avg yield at 7.23%, bid-to-cover at 3.7 9 (p2) / Negative – banking system returns to losses in 3Q11 (p2)
Today’s Events
KZ: Oct International reserves / RO: Sept Retail Sales, Wages / SK: Sept retail sales
EEMEA Markets
Global Backdrop: Greece worries again affected markets yesterday, as it became ever more likely that snap elections will have to be held. Equity markets, however, rallied after a volatile opening session also supported by the surprise ECB rate cut. DAX was trading 2.8% up on the day, surging 4.5% from its intraday lows while EURUSD too was showing 1% intraday gains at 1.3800. SovX CE was unchanged at 300bp. Asian markets closed 2/3% higher O/N.
Local Currency Markets: auctions were better than feared. Hungary managed to sell 3y, 5y and 10y bonds yesterday after a very weak T-bill auction on Weds. Amount for the 3y was however cut from HUF 20bn to HUF 15bn. Bid to cover ratios were 1.12x for the 3y, 1.25x for 5y, 2.18x for 10y. Average yields were 7.65%, 7.90% and 8.17%, slightly higher than pre auction levels. The results are neutral overall, though some might have feared a worse outcome given Hungary’s clear underperformance recently and a failed 1y T-bill auction last week. Czech Republic sold CZK 9bn 1y T-bills at 1.05%, the lower end of expectations and a bid to cover ratio of 2.6x a more promising performance than Wednesday’s less successful bond auction. Romania sold RON500mn 2y ROMGB with 3.70 bid cover ratio. The average yield came at 7.23% vs. 7.4% at the previous auctions. Meanwhile RON CCS rates continue to move lower with the curve now firmly below the 5.0% level. Rates elsewhere in the region show little change, except Turkey with the curve jumping 10-15bp after the high CPI number. We still think TRY will outperform PLN and HUF and remain long at the long end of the TURKGB curve (Jan 2020) – after the CPI data investors might ask if the CPI linked bond is a better bet. With real yields still low around 3.1% we would wait for improved levels on CPI linked bonds. Local currency strategy: we took 6.5% profit on long PLN/HUF, reiterate our short HGB view – recommend SELLING 22/A – see separate note.
External Debt: not much action on the day after earlier losses have more or less been recovered along with the general intraday risk improvement in region.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/11/EEMEA_Daily_04Nov11.pdf
Gyula Toth
UniCredit Research