News
CR: Neutral – Centre-left coalition wins 81 seats in parliament (p2)
CZ: Mixed – Nominal wages grow 2.4% yoy in 3Q (p2)
LV: Negative – Nov IP growth decelerates to 5.1% yoy (-0.9% mom sa) (p2)
RO: Positive – MinFin sold RON 1.1bn in 7M T-Bills – yield 6.6% / Positive – Oct retail sales increased 2% yoy (p2)
SL: Mixed – Positive Slovenia wins most votes in general elections (p3)
TK: Neutral – Nov CPI comes in at 1.7% mom (9.5% yoy) (p3)
Today’s Events
CR: HRK 1.1bn and EUR 30mn T-Bill auctions / CZ: Oct retail sales / HU: MPC meeting (no rate decisions) / RO: 3Q GDP (final) / SK: 3Q GDP (final) / SRB: RSD 6.7 18M T-Bill auction / TK: 2013 GB fixed rate TRY auction / UA: UAH GB and T-Bill, USD-linked 3Y, 5Y and 10Y GB auctions, Nov CPI
EEMEA Markets
Global backdrop: The positive global mood has been halted by the S&P decision to put 15 EMU members (including all triple A sovereigns) on credit watch negative. It justified the decision arguing that ongoing systemic stress is exerting pressure on the ratings. The ratings will be reviewed after the forthcoming EU summit. Meanwhile the BTP curve tightened a sizeable 90/100bp at the shorter maturities and about 70bp at the 10Y. Merkel & Sarkozy said that they agreed on tougher fiscal measures for safeguarding fiscal policies but not on plans to change substantially the treaty. Focus is now shifting to the ECB meeting where our colleagues expect a 25bp rate cut, a 2-3y LTRO, high probability of easier collateral rules and maybe a program to buy bank bonds. Given light positioning we remain relatively constructive on CEEMA markets for the rest of the week.
Turkey – the CBT’s battle to stabilize the TRY and expected economic slowdown should mean relatively stable FX and outperforming long end of the TURKGB curve. We published an article on Turkey this morning arguing that the CBT has started using its balance sheet much more actively with a view that the economic slowdown is going to happen. We concluded that this backdrop and significantly reduced positioning has improved the risk-reward characteristic of long TURKGB positions. We highlight that local banks TURKGB holdings has significantly declined during the year (between Dec and Oct 2011 they sold TRY 87bn TURKGB) but in November they started buying TURKGBs again in relatively meaningful size (holdings up TRY23bn). We believe this favourable positioning and market pricing suggest the curve should be much flatter than current levels while the short end could stabilize in the current range but with potentially big swings. We expect the 2013 benchmark to trade around the current 10.5%/11% level with some upside bias while the belly to long part of the curve (Jan 2016 and Jan 2020) to outperform and potentially move into single digits in 2012. Given our outlook for the TRY, we prefer to express this view via buying FX unhedged mid to long TURKGB paper.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/12/eed-fi-061211-0000.pdf
Gyula Toth
UniCredit Research