News
CZ: Neutral – MinFin auctions CZK 6.04bn of 3.85/21: bid/cover 1.5, yield 3.16% (p2)
KZ: Negative – The net international reserves decreased by USD 3.5bn to USD 32.5bn in September (p2)
PL: Mixed – MPC keeps policy rates unchanged at 4.50% issues some hawkish comments to support the PLN (p2)
RO: Positive – The average net wage decreased in August vs. July (p2)
Today’s Events
CZ: August Retail sales / HU: August IP, HUF 20bn 2014, HUF 15bn 2017 and HUF 8bn 2022 HGB auctions / KZ: KZT 18bn GB auction / RO: August IP, RON500mn 2016 GB auction / SRB: Policy rate decision, 3M tbill auction / UA: September PPI and CPI
EEMEA Markets
*Global backdrop*: continued short squeeze in equity markets saw SPX jumping by 1.8% and Asian equities also managed to post gains around 1-2%. Credit markets somewhat lagged the rally but HY and IG spreads both tightened later in the day. Sovx CEEMEA and West are also catching up tightening about 8bp this morning. EUR/USD is trading around 1.33. The main even of the day will be the ECB meeting where consensus is ranging around extending LTRO and potentially cut in the policy rate. On the back of ongoing short squeeze in global risky assets we are looking for further consolidation in CEEMEA markets with further support from several Central Banks in the FX markets also likely.
*Turkey*: the CBT has stepped up efforts to boost the TRY and the basket reached 2.20 early yesterday The RR cut for FX deposits and the significantly increased FX auction size has added about USD2.0bn to the market. We believe after yesterdays measures the CBT has proved that it means capping lira losses around 2.20 level. In case the direct intervention still does not work we would expect the bank to limit money market liquidity which in turn could push short end rates significantly higher. Hence we think paying 1y or 2y CCS rates make sense in the current environment.
*Poland*: the NBP MPC left rates unchanged at 4.50% and effectively left the tone unchanged from the last meeting. Later in the press conference Governor Belka issues some hawkish comments which in our view were intended to support the PLN further. We would stay long PLN/HUF at current levels with a target at 70.0.
*CEEMEA local currency auctions*: Hungary will auction HUF43bn HGBs (14/D, 17/A and 22/A) whilst Romania will auction RON500mn 2016 ROMGB. In the later case we expect the MinFin to cap yields around 7.60% and hence only partial fill is likely. In case of Hungary the auction will be the key test after the failed 12m t-bill auction. The market opened unchanged this morning but give the global short squeeze we would expect further short covering particularly at the long end.
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http://www.easyforexnews.net/wp-content/uploads/2011/10/EEMEA-Daily_6ct11.pdf
Gyula Toth
UniCredit Research