News
BG: Neutral – Jan international reserves decreased 2.8% mom (+6.2% yoy) (p2)
CZ: Neutral – CNB leaves repo rate unchanged at a record low 0.75% (p2)
HU: Neutral – State owned airline Malev files for bankruptcy and stops operation, fiscal impact should be small
RO: Dovish – NBR cut the monetary policy interest rate by 0.25pp to 5.5% / Positive – MinFin sold RON 1.3bn of 3Y GBs: avg. yield 6.79%, bid/cover 2.13 / Neutral – Dec PPI comes in 7.0% yoy / Positive – Dec retail sales increase by 0.3% mom sa (p2)
RU: Neutral – CBR leaves interest rates unchanged in line with consensus
Today’s Events
CZ: Dec retail sales / CR: Dec retail trade / LV: Dec industrial production / RU: CBR rates decision, Jan services PMI / SK: Dec retail sales / TK: Jan CPI, Jan PPI
EEMEA Markets
Global backdrop: Yesterday, Bunds and UST closed little changed after having been in positive territory in the morning. Stocks managed to close the day with moderate gains. Data releases will be center stage today. US and EMU data should prove moderately bond unfriendly. Talks on Greek PSI will continue to keep uncertainty high. However, the positive momentum for periphery and especially BTPs should continue.
Flows remain strong in EM funds: data published this morning by EPFR shows that EM bond funds saw their strongest inflow since August last week at USD1.1bn. The currently breakdown shows that hard currency funds saw inflow of USD865mn vs. local currency bond funds seeing USD296mn inflow. The fund flow backdrop remains extremely supportive of EM assets particularly credit at this stage.
Romania: NBR cuts policy rate b 25bp to 5.50%. This was the third consecutive cut after a 17-month pause. In its November inflation forecast (to be updated next week), the NBR expected inflation around 3% until late 2013, core inflation around 2% and a slowly closing negative output gap that is still around -5%. On the back of this, we see scope for further cuts, especially since demand-side inflationary pressures are negligible over the medium term. Nevertheless, the easing cycle could end at 5% (i.e. at a positive real interest rate) if food prices start rising again in 2H12. Strategy wise we remain short EUR/RON in the spot market as the policy rate itself does not have affect money market rates or implied rates. Moreover we believe the dovish NBR coupled with the likely inflow related to the recent Eurobond issuance will likely push the short end of the onshore yield curve lower. Hence we continue recommend buying 12M t-bills at next weeks auction which look very attractive compared to the FX implied yields.
Click here to read the full report: EEMEA daily 030212
Gyula Toth
UniCredit Research