News
HU: Mixed – AKK sells HUF52.5bn HGB, demand for shorter paper strong, weaker for the long end
RO: Mixed – RON226mn 10y ROMGB sold at 7.59%,
TK: Mixed – Aug industrial confidence drops sharply, CU held up well
Today’s Events
TK: July trade balance / TK: July foreign tourist arrivals / SA: CPI linked bond auctions (2028 and 2033)
EEMEA Markets
Global backdrop: all eyes will be on Bernanke’s Jackson Hole speech today. Our colleagues expect no announcement of Q3 but a reiteration that the Fed is willing to easy policy further in case needed. Meanwhile equity markets closed a rather weak session (DJIA down 1.5%) and Treasuries rallied about 10bp. Asian equities closed roughly flat. The lack of QE3 will likely see G3 bond markets extending their rally which continue to provide a bullish case for local currency rates in countries with more solid fundamentals.
Hungary: the AKK sold HUF52.5bn HGBs at yest bond auction. The demand was rather strong at the short end and weak at the long end. This plus the deteriorating risk appetite has seen the curve bear flattening with 2y-10y gapping about 15bp. We would expect local players who missed the recent rally given their short duration allocation to soon step in the market. On ASW basis we see papers beyond 17/B relatively cheap (see chart). We would also note the complete lack of non-resident bond holdings amid last weeks rally. In EUR/HUF we would remain neutral at current levels.
Poland: NBP Minutes show that the bank is in wait and see mode and according to comments from Governor Belka it is too early to talk about rate cuts yet. In the current environment we still see the PLN relatively vulnerable to risk aversion. On the other hand POLGBs will likely benefit further from lower global yield environment.
Turkey: USD/TRY moved about 1.6% lower as the market continues to bet that the CBT will be successful in halting TRY weakness while the global slowdown is helping to correct the current account balance. This has occurred despite the CBT has offered only USD70mn at yesterdays FX selling auction. As the global slowdown might disproportionally support the TRY whilst hurts commodity dependent ZAR we believe TRY/ZAR might extend the move north after breached the 50day moving average yest. Next target could be around 4.22 on the cross rate (see chart).
Ukraine: the IMF has announced that it is postponing the review to October as the government failed to increase the necessary tariffs. We reckon that the authorities are separately trying to reach a deal with Russia about lower gas prices. About 30pct discount would completely offset the lack IMF inflow albeit reform dynamics will likely stall. The news so far had limited impact on the CDS which is trading around 560bp.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/08/eed_fi_260811_0000.pdf
Gyula Toth
UniCredit Research