News
KZ: Mixed – Kazakhstan’s real GDP expanded 6.7% yoy in Jan-July vs. 7.1% in Jan-June (p2)
RU: Mixed – CBR cuts repo rate buy 25bp and hikes deposit rate by 25bp in a move to reduce money market volatility (p1)
Today’s Events
CZ: August PPI / HU: final July industrial production / HU: 12M t-bill auction (HUF50bn on offer) / TK: June unemployment / PD: August budget performance / RO: 3y ROMGB auction
EEMEA Markets
* Global backdrop: equity markets improved after Germany and France issued supportive statements about Greece and despite Austria denied the extension of the EFSF for now. Both US and Asian equities were more than 1% up whilst tensions in the EMU banking sector are easing (SnrFin 5y spread tightening almost 20bp since Tue,, whilst EUR/USD basis swaps also moved north). Meanwhile CEEMEA markets failed to benefit from this as Hungary came under significant pressure and EUR/PLN hit YTD highs.
* Hungary: sharp sell-off was observed in the market (with HGB yields jumped 25-30bp, and EUR/HUF jumping above 288.00) as more and more market players realizes the real impact of the FX mortgage early repayment plan (in short maximum 38% capital loss for the banking sector and about EUR18.3bn demand for FX). News in the local press this morning suggest that the government plans to exclude mortgages which were taken above CHF/HUF 180.00. The chart shows it was the case since Q1 2009 but we note that FX mortgage lending basically stopped since then. We stay bearishly positioned (remain long EUR/HUF and paid in 2y HUF IRS).
* Romania: all eyes will be on the NBR actions today as the EUR/RON has moved above the 4.30 yesterday late afternoon. Although this was an important level for the bank historically (this is the first time the cross is trading above this level in 2011) we think this time around it may not make sense to draw a strong line given broader selling pressure in the markets. Nevertheless the RON outperformance might continue in the coming weeks with RON/HUF already up 5% since the beginning of August.
* Russia market update following the CBR rate decision: 3M Mosprime was up by 20bp at 5.14% (bbg mid) following the CBR simultaneous hike in the depo rate (to 3.75%) and cut in the repo rate (to 5.25%) yesterday. The 3M Mosprime was around 4% in H1 2011. With the liquidity squeeze gathering steam in the local market the basis swap curve is also inching higher. The 1y USD/RUB basis is around -10bp. As a reminder in 2008 this was above plus 1500bp. The cash liquidity situation in the banking sector (deposits and correspondent accounts) shows that the excess liquidity is shrinking. YTD avg was RUB1200bn and is now around UR900bn. The implied yields in the RUB NDF market are also inching higher with 3M currently at 5.50% up from about 3-4% in the first half of the year. Meanwhile the MinFin sold only RUB4.6bn OFZ 2021 paper yday with avg. yield at 8.1%. It is interesting to note that the long end OFZ yield at 8.1% is almost above the last CPI print.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/09/EEMEA-Daily_15Sept11.pdf
Gyula Toth
UniCredit Research