News
BG: Neutral – Economic sentiments surge 3.3pp mom in January; PPI down 0.6% mom (p2)
BG: Neutral – NBK to maintain current monetary policy framework (p2)
RO: Negative – Local press reports that coalition parties will try to hike wages and pensions by “at most 5% if economic growth is in the 1.8%-2.3% range [in 2012]” / Neutral – Constitutional court rules on local and parliamentary elections date (p2)
Today’s Events
BG: Dec Budget balance / CZ: Dec Money supply / CR: EUR 40nm and HRK 350mn 91-364D T-Bill auctions / HU: Dec Unemployment, 3M t-bill auction / PL: NBP inflation expectations / SRB: 4Q GDP (prelim.), RSD 10bn T-Bill auction, Dec IP, Dec Retail trade / RU: 2011 GDP / TK: Dec Trade balance / UA: 4Q C/A
EEMEA Markets
Global backdrop: markets started the week on a negative note. The environment was risk-off with equities in the red while UST and Bund yields edged lower. Both the US and German curves bull flattened, with 10Y yields falling 6-7bp and the 2Y little changed. The 5Y UST yield marked a new record low level (0.72%). Short end Portugal yields jumped as much as 300bp yesterday. The negative mood will be offset by the EU agreement on the new fiscal compact treaty which will be signed in March. The EMU members also agreed on the ESM which will into force in July. Asian equities managed to close in the positive territory and we expect a moderately positive mood in the open in CEEMEA markets.
Local currency bond auctions: 1) today Serbia will issue 24months t-bills, RSD10bn will be on offer. With EUR/RSD still hovering around multi month high levels we see the entry point attractive with yields likely coming around 12.75/13%. 2) in Hungary the AKK will auction HUF45bn 3M t-bills. The last 3M paper came at 7.65% average yield with 2.0 bid cover ratio. Following the recent collapse in t-bill yields and a jump in HUF implied yields the carry on an FX hedged t-bill position declined to around 270bp from around 350bp a few weeks ago. Still looks attractive but clearly much less compelling.
Romania: The local press reported that the coalition parties will try to hike wages and pensions by at most 5% if economic growth will range between 1.8% and 2.3% in 2012. We think the news is slightly negative as the 5% hike would push the budget deficit above the 2.5%/GDP level. We do not think this would push the Romanian IMF program off track but expect some critical tone from the official lender in the coming days. Romanian markets outperformed in the last few months mostly due to the buffer the IMF program provided.
Click here to read the full report:EEMEA daily 310112
Gyula Toth
UniCredit Research