News
HU: Neutral – NBH MPC hikes rates by 50bp in line with consensus (p1)
BG: Negative – Economic sentiment down by 1.7 points in Nov (p2)
LT: Positive – Final 3Q GDP revised up to 6.7% (p2)
Today’s Events
BG: Oct PPI, Policy rate decision / CZ: CZK8bn 2017 CZGB auction / ES: Oct retail trade / CR: Oct trade balance / HU: Oct PPI / LV: Oct retail trade / PL: 3Q GDP, NBP Inflation expectations / SRB: Oct IP, Oct Retail trade, Oct trade balance / SK: Sep C/A / SL: 3Q GDP, Nov CPI, Oct Retail trade / TK: Oct trade balance
EEMEA Markets
* Local currency bond auctions: Today the Czech Republic will auction CZK8bn 4% 2017 CZGBs. We continue to think the CZGBs are trading at very attractive levels within CEE local bond markets. Specifically we note that ASW spread is currently around 150bp on today’s CZGB auction paper which is a few basis points wider than HGB 17 papers (about 145bp) and about three times wider than the similar maturity POLGBs (circa 50bp). We believe this is in stark contrast of credit risk pricing in the CDS market. While the 5y Czech CDS is trading around 190bp the Hungarian CDS is trading around 620bp. Against this backdrop we still see significant value in CZGBs in line with our trade of the week recommendation from our latest EEMEA Weekly.
* Hungary: The NBH MPC hiked rates by 50bp yesterday in line with market consensus but against our call for unchanged rates. Although Governor Simor stated that the MPC formally voted about the 50bp rate hike and passed with unanimous majority we believe they probably discussed a much bigger rate hike. We do not think that the 50bp hike will have a meaningful impact on markets as the real game changer for Hungary remains a potential IMF agreement. We actually see the 50bp as a reflection of weakness given the split MPC was unable to take a bold step with either hiking much more of leaving rates unchanged. From strategy perspective we maintain our cautious stance toward Hungarian assets but at the margin see bearish positioning the heaviest in the HUF.
* Poland: Today the Q3 GDP will be published and the market is looking for 4%yoy growth. High frequency real economic data suggest that the Polish economy is holding up relatively well and this clearly does not support monetary easing at this stage. The NBP will also publish inflation expectations number. Meanwhile EUR/PLN is trading at YTD highs amid lack of NBP/BGK interventions. Local market participants expect some form of intervention today (NBP or BGK).
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http://www.easyforexnews.net/wp-content/uploads/2011/11/eed_fi_301111_0000.pdf
Gyula Toth
UniCredit Research