News
BG: Neutral – C/A surplus narrows to 3% of GDP / MinFin sold EUR 35mn 7Y GBs: avg. yield 4.45%, bid/cover 3.42 (p2)
CZ: Positive – Dec PPI comes in at 4.6% yoy (0.1% mom) (p2)
RO: Positive -MinFin sold RON 3.5bn 1Y T-Bills: avg. yield 6.21%, bid/cover 1.2 (p2)
TK: Negative – Dec central government budget balance comes in with a deficit of TRY 17.9bn (p2)
Today’s Events
HU: 3M T-Bill auction / SL: Nov unemployment / TK: 2018 floating GB, 2013 GB auction / UA: Dec IP, UAH 3-12M T-Bill and 2Y GB, USD-linked 1.5Y and 3Y and USD-nominated 3Y GB auctions, / SRB: reopen of 18M t-bills
EEMEA Markets
* Global backdrop: Asian markets gained on the back of expectations regarding Chinese rate cuts following the economy posted the slowest expansion in the fourth quarter in 2.5years. Equities were up 1.0-1.5% whilst KRW was about 1% stronger. Yields on UST and Bunds however broadly maintained their YTD gains. Today the Jan ZEW will be in focus.
* Vienna initiative: The EBRD issued a statement following yesterday’s meetings in Vienna. Although it does not include any concrete measures it is urging for further policy coordination between host and home country supervisors and other policymakers. The parties agreed that the discussions will continue in Brussels which could eventually lead to a Vienna Initiative 2.0 which in our view would be very supportive of the whole CEE region. We look for further policymaker comments from the today starting Euromoney conference in Vienna.
* Hungary: EC to issue official letter regarding three EU infringement procedures today. This in itself should not be surprising as the EU effectively pre-announced this step last week. We believe the key from here will be the reaction of the government and the parliament. Due to their two third majority, any change in the law is technically easy and fast. The most negative reaction would be if the government starts disputing the procedure which in turn could seriously delay the start of the official talks regarding external assistance. We estimated earlier than Hungary needs to conclude the talks before March/April the latest (based on available cash accounts).
* Local currency bond auctions in CEE today: 1) Serbia will reopen the 18months t-bills, with RSD5.3bn on offer. Our local colleagues expect relatively strong demand and yields around 12.75-12.95%. 2) Hungary will auction 3months t-bills. HUF45bn will be on offer. We note that the carry on the FX hedged 3M t-bills spiked to around 375bp (on the back of falling FX forward implied yields). This is the most attractive carry in at least 2years. 3) Turkey will issue 2018 floaters and new 2013 zero coupon benchmark papers. The later will be a key investor sentiment test following the recent spike in yields. We expect the auction yield coming around 11.00%. 4) South Africa: ZAR1.1bn R207 and ZAR1bn R214 paper will be sold. The secondary market yields are around 8.0% and 8.98% respectively.
Click here to read the full report: EEMEA Eco Daily 170112
Gyula Toth
UniCredit Research