News
BG: Mixed – C/A balance in April reaches 2.3% of GDP (p2)
RO: Negative – MinFin sells RON 0.18bn 3Y ROMGB: yield 7.49%, (p2)
TK: Neutral – 8M11 central budget primary surplus comes in at TRY 8.6bn (p2)
Today’s Events
HU: July Wages / PL: August Unemployment and Wages / RU: (16-19) August PPI, Wages, Unemployment, Retail sales / SL: July Unemployment / TK: August Consumer confidence
EEMEA Markets
* Global backdrop: CEEMEA markets were supported by the coordinated central bank actions where the ECB will provide 3M USD liquidity. We believe the primary channel toward CEEMEA will be the easing funding conditions in the Eurzone banks which in turn will push EUR/USD basis swaps higher. As in CEEMEA several banking sectors also faced FX liquidity shortages recently (probably contributing to FX spot buying from local banks) the measure will push local basis swaps higher as well. Indeed HUF 3M FX fwd implied yields already moved 15bp yesterday and are now almost 75bp above the bottom (also supported by the SNB interventions). Basis swaps and FX fwd implied rates also moved higher in Poland and Romania in the last few sessions. Apart from the easing pressure on spot FX to depreciate this will also make FX hedged local instruments less attractive but support mark to mark performance of those investors who are already invested. Indeed the carry on a 3M FX hedged Hungarian t-bill has declined to around 145bp from 230bp two weeks ago (see chart). In terms of investor activity we heard several investors using the current bullish mood to reduce local currency bond exposure in the CE3 markets.
* Russia: money market liquidity was also boosted from the Central Bank announcements but 3M Mosprime closed at 5.5% above the new lowered O/N repo rate whilst 1y RUB CCS closed a rollercoaster session (trading in a 60bp range) but on balance remained paid. Meanwhile excess liquidity in the banking sector (deposits at the CBR) has declined further yesterday (by RU30bn to RUB820bn) and RUB was under pressure as well. The CBR stated that they keep the RUB basket corridors at 32.25-37.25 but they also stated that the bank intervened for about USD200mn during this week. As the top is still too far away we think the door is probably open for further n-t depreciation. The RUB basket is 0.5% weaker this morning.
* South Africa: following two days of sharp non-resident SAGB selling (for ZAR10bn) foreign investors were net buyers of bonds yesterday for about ZAR2.3bn. According to the latest data non-residents investors bought ZAR50bn SAGBs YTD. Meanwhile the SAGB curve continued to slightly flatten with 5y-10y spreads about 15bp below the early September levels. As non-resident positioning is probably the heaviest on the long end we would expect steepening if the position reduction continues.
* Poland: the traditional EMU convergence measure (if the concept is still alive), the 5y5y PLN vs. EUR forward spread was trading at multi year highs at around 200bp yesterday morning. As we believe most of the non-resident POLGB inflow was FX hedged YTD we do not necessary think that the FX depreciation is poisoning the local market. On the other hand similar to South Africa non-resident positioning is probably the heaviest in the long end. Notwithstanding this due to the elevated level of the spread we would expect further tightening in the n-t.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/09/EEMEA-Daily_16Sept11.pdf
Gyula Toth
UniCredit Research