News
HU: Positive – AKK sells higher than expected amount at HGB auction amid strong demand
HU: Negative – Fidesz Deputy Chairman Kosa says govt is unlikely to change the flat tax despite IMF request
PL: Positive – Poland sells USD1bn in a tap of the Poland USD 2022 paper, the spread was 295bp above Treasury (p1)
KZ: Mixed – BTA: The bank advised in a press release that none of the resolutions put to the agenda of the general shareholders’ meeting on 26 January were passed (p2)
Today’s Events
BG: Nov Gross External Debt / CR: Dec IP / PL: 2011 GDP, Dec Retail Sales, Dec Unemployment / RU: Money Supply as of Jan 23 / SK: Dec PPI
EEMEA Markets
Global backdrop: Periphery tightening continued yesterday, with the 10Y BTP Bund spread falling to 420bp and the 10Y briefly falling below 6%. Bund yields were also down, possibly as a result of the dovish FOMC statement. PGBs were under pressure on talk that the current EU/IMF program will require extension. Focus today is on the US 4Q GDP, expected to rise 3%, up from the previous 1.8%. After the Fed’s pledge to keep rates low until 2014 a lower than expected reading is likely to favor curve flattening, while we would not expect a strong rise in yields in case of a better than expected reading.
Poland continues to frontload borrowing: amid improving market conditions following the FOMC announcements Poland tap its Poland USD 2022 and issued another USD1bn. The spread came about 295bp above the treasuries which represents about 10bp tightening compared to the initial yield guidance. With this issuance Poland already issued USD2bn so far this year and we estimate another USD4bn to be financed probably in the first half of the year. The combined local and hard currency borrowing YTD has already covered about 30% of the total annual borrowing need. Front loaded issuance is good news for Polish credit on the multi month outlook given less supply pressure later in the year. We nevertheless remain neutral on Polish credit whilst in the local currency bond space we remain payers of 5y PLN IRS as an attractive hedge.
EM bond fund flows pick up significantly last week: EM fund flows according to the EPFR data for the week from 18-Jan-12 to 25-Jan-12 has finally recorded strong inflow of USD 907mn, the biggest inflow since the beginning of Aug last year. The currency breakdown shows that into into local currency dedicated funds was USD472mn vs. USD343mn moving into dedicated hard currency funds. The inflow into blend currency funds was pretty weak with only USD 61mn.
Click here to read the full report: EEMEA Eco Daily 270112
Gyula Toth
UniCredit Research