News
BG: Neutral – Ruling CEDB party consolidates power after the first round of presidential and municipal elections (p2)
PL: Mixed – FinMin J. Rostowski said that any adjustments to the 2012 budget assumptions will depend on the effectiveness of EFSF (p2)
TK: Mixed – September Capacity Utilization Rate at 77.0% (p2)
Today’s Events
BG: August external debt, CR: HRK 150mn and EUR10mn T-bill auctions, HU: HUF 40bn 1Y T-bill auction, Policy rate decision, PL: September retail sales, unemployment, SRB: RSD 10bn 24mn T-bill auction, September Wages, UA: UAH Jan-2012, Jul-2012 T-bill and 2013 GB auctions
EEMEA Markets
* Global backdrop: market activity was relatively muted at investors are waiting for the Wednesday EU announcements. Asian equities closed mixed whilst European markets are opening in small negative territory. EUR/USD is trading around 1.39 which in our view continues to be inconsistent with the EUR/CEE markets.
The current level of CEE FX would be more consistent with EUR/USD at around 1.30 (see our weekly). In order to exploit this we continue to recommend selling EUR/PLN and buying mid part POLGBs.
* South Africa: today South Africa will auction R203 (ZAR1bn) and R207 (ZAR1.1bn) papers. Last week the auction of the long end paper was very poor which led to a significant sell off at the long end. Since then the curve has steepened significantly. She secondary market level of the two papers is 7.5% and 8.0%. Separately mid term budget will be published at 1pm ldn time.
* Hungary: the NBH MPC will hold rate setting meeting today. We and the consensus expect unchanged rates but in our view this does not reflect the lack of concern but more lack of ammunition. Apart from this the AKK will auction 3M HUF t-bills (HUF40bn will be on offer). The yield range is around 6.00/6.10% which would translate to around 165bp positive carry (according to bbg mid) on FX hedge positions.
* Serbia: RSD5.4bn 2y paper will be auctioned today. We expect yields to remain around the 13% level. We see little room for non-resident participation as illiquid markets are not in fashion at the moment as long as the liquid markets also provide sufficient pick up.
* Ukraine: following the failed local currency bond auctions last week Ukraine will again try to sell UAH denominated papers. 3M, 6M t-bills and 2013, 14, 16 and 21 papers will be on the offer. As the IMF is in Kiev we think newsflow should improve in the coming days if they manage to reach an agreement. As we noted in our note last wee this seems to be a much better option for the government than a forced UAH devaluation. In this sense we still see value in Ukraine Eurobonds (particularly at the short end of the curve)
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/10/EEMEA-Daily_25oct11.pdf
Gyula Toth
UniCredit Research