News
CZ: Mixed – MinFin sells CZK 7.95bn VAR/17: avg. yield 6M PRIBOR+89bp, bid/cover 1.21 / CNB Governor M. Singer said that the current CZK exchange rate allows CNB to keep its policy rates on hold (p2)
PL: Dovish – Labor market confirms the lack of wage pressure in the economy (p2)
Today’s Events
HU: HUF 45bn 12M T-Bill, HUF 5bn 2015/B GB auctions / PL: PLN 6bn 2014 GB auction, Dec IP, Dec PPI / RO: ROM 300mn 5Y (reop.) GB auction / SRB: Policy rate decision / UA: UAH 12M T-Bill, 2Y and 3Y GB, USD-linked 1.5Y and 3Y GB auctions
EEMEA Markets
* Turkey taps international markets but offers wide premium: yesterday Turkey issued USD1.5bn 10y USD paper (09/2022). The issue itself is not surprise (we estimate that Turkey will issue for about USD4bn this year) but the pricing was surprising. At the time of the announcement the new paper offered almost 45-50bp pick up versus the curve compared to around 25bp avg premium last year. The wide premium underlines that issuance from the CEEMEA is not easy and investors are clearly demanding higher premium. This is not boding well for countries like Ukraine, Croatia or Hungary but even Romania will likely need to revise their expectations in terms yield guidance.
* Hungary – Orban confirms cooperation: PM Orban yesterday in the EU parliament confirmed that Hungary is ready to cooperate in terms of the disputed laws. The next step will be a meeting between him and Barroso next Tuesday. After that, in a ideal case we would expect a quick parliamentary session where they can change the disputed laws. This would likely lead to a start of the official negotiations with the IMF and EU. Meanwhile markets are again pricing a quicker deal as EUR/HUF moved close to 304.00 from 325 just 1.5 weeks ago and Eurobonds also showed strong gains. Today the AKK will test market sentiment with HUF45bn 12M t-bill and HUF5bn 3year floaters.
* Polish labour market data show no sign of inflationary pressure: In the context of monetary policy, yesterday’s labour market data (2.3%YoY employment growth and 4.4%YoY wage growth) confirms the lack of wage pressure in the Polish economy, which supports our scenario that assumes unchanged interest rates in the coming months and the possibility of a rate cut over the slightly longer term (in our opinion the MPC may decide to reduce the cost of money at the earliest in June) along with deteriorating economic sentiment and a decline in domestic inflation. Today the December industrial production data will be published. The consensus is looking for a slowdown to 6.2%YoY from 8.7%YoY. We also note that with the wage bill growing around 7%YoY industrial production probably need to stay around this level in order to have slowing unit labour cost growth.
Click here to read the full report: EEMEA Eco Daily 190112
Gyula Toth
UniCredit Research