News
HU: Neutral – August Unemployment comes in unchanged at 10.8% (p2)
RU: Negative – FX reserves fell USD6bn last week, we reckon roughly half was due to interventions (p1)
SI: Negative – Fitch downgrades credit rating to AA- with negative outlook (p2)
Today’s Events
CZ: CZK 8bn 273d CZGB auction / CR: July Wages / HU: August PPI, 2012 budget submission to Parliament, HUF / KZ: KZT 13bn floating GB auction/ PL: 2Q C/A / RO: Policy rate decision / UA: 2Q GDP (final)
EEMEA Markets
* Global backdrop: Asian markets were consolidating O/N despite US equities closed about 2% lower. Meanwhile KRW appreciated about 1% during the day after a weak open. Today the Bundestag will vote on the expansion of the EFSF loan capacity. We expect the bill to be passed. Also today EC Economic Sentiment indices should provide the first hint about the damage done by the September market turbulence. We will get ESI data for EU member CEEMEA countries as well.
* Russia: the weekly FX reserve data published this morning (USD526bn from USD532bn) suggests that the CBR has intervened for about USD3.6bn in the week ending last Friday (after adjusting for EUR/USD changes). The RUB basket opened about 20kopecks weaker this morning (37.10). Meanwhile short end rates fell another 20bp yesterday whilst they opened about 10bp higher this morning. After taking half profit on our 2y RUB CCS payer up around 8.0% we see some logic cautiously increasing payer positions again around the 6.90% level.
* Hungary: although no official statement is out yet the NBH met local banks to discuss the framework of the FX conversions related to the FX mortgage early repayment scheme. In our understanding the FX selling auctions might start as soon as next week. As the NBH does not intend to intervene directly on the market we believe banks will need to prove that their FX demand is related to the mortgage repayments. From this perspective we believe the actual start of the FX auctions is neutral at this stage as the extra supply is matched by the FX reserves. Apart from this today the GDMA will auction 12M HUF t-bills (HUF40bn on offer) and 5y floaters (2015/B with HUF5bn on offer). We estimate that the carry on the FX hedged t-bill is around 220bp.
* Slovenia: Fitch downgraded Slovenia one notch to AA- citing the deterioration in the financial position of the banking sector as posing a significant risk that the sovereign will need to contribute to future recapitalisation. This is Slovenia’s second downgrade in two weeks, after Moody’s. We believe S&P, which has provided more comments on Slovenia in the past, will not be too long in downgrading the country too. We remain bearish on Slovenia credit particularly versus Slovakia. Although the 5y CDS spread is about 20bp wide we expect further underperformance from Slovenia.
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http://www.easyforexnews.net/wp-content/uploads/2011/09/EEMEA-Daily_29Sept11.pdf
Gyula Toth
UniCredit Research